How to thrive with Banking-as-a-Service

The demand for simplified banking services is on the rise as consumers expect quick and convenient access to financial products. Corporate and retail consumers are increasingly attracted to Banking-as-a-Service (BaaS) due to its ability to provide a convenient, accessible, integrated, and inclusive approach to finance.

BaaS positions financial institutions as member-centric and agile organizations that can easily adapt in a highly competitive environment.

This allows credit unions and small banks to level the playing field and benefit from collaboration. They can align their financial products with the dynamic market and emerge as BaaS leaders alongside larger institutions. But they must act fast to capitalize on the BaaS opportunity and gain a strong footing in this space with secure, innovative offerings.

Credit unions are joining the BaaS landscape

Many FIs, including credit unions, are leveraging BaaS to enhance client loyalty, support corporate payment demands, and secure their role in the future of banking. Credit unions and small banks have advantages to empower their ability to capitalize on BaaS, such as agility, localized expertise, personalized member relationships, and trustworthy reputations.

BaaS is the stepping stone smaller financial institutions need to align their financial products with emerging consumer segments and markets to generate more revenue and diversify their member pool.

Of 300 surveyed credit unions and community banks, 125 are already providing BaaS services, and about 60 are creating a BaaS strategy.

Strategic approaches for smaller financial institutions to offer BaaS

In a BaaS model, a chartered financial institution partners with a fintech or non-financial business so the partner can offer financial products to their members. It’s a win-win for both parties: partners don’t have to get a banking license or implement a banking infrastructure, and financial institutions can reach a wider consumer base at a lower cost.

Protecting BaaS from complex threats

When credit unions choose to adopt the BaaS model, it is crucial for them to prioritize risk management and compliance. Thoroughly prepare for all potential business and legal implications before entering into a BaaS arrangement.

Credit unions should perceive BaaS as an integral part of their comprehensive digital transformation agendas rather than a separate initiative. The potential of BaaS is not limited to larger financial institutions; it presents an opportunity for every organization within the financial ecosystem, provided that meaningful consideration is given to all business implications and potential risks.

Explore the BaaS imperative for smaller financial institutions in greater depth in NICE Actimize’s companion Insights Article.