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New Study: SMBs Should Tap Banking-as-a-Service the Same Way B2Cs Did

Small- to medium-sized businesses (SMBs) that partner with a financial institution (FI) to offer banking services can tap into two fast-growing industries.

The first is Banking-as-a-Service (BaaS), which is expected to become a $3.6 trillion industry by 2030. Eighty-one percent of FIs in a survey saw BaaS as a way to increase business, shorten time to market, improve distribution channels and streamline operations.

Read more: How Banking As A Service For Consumers Could Foreshadow B2B Payments’ Future

The other growing sector SMBs can benefit from by offering banking services is B2B eCommerce, a market that approached $7 trillion last year and is anticipated to exceed $20 trillion by 2027.

Already, 42% of U.S. SMBs surveyed have observed their online transaction volumes increase during the pandemic. And nearly 70% of business buyers now expect their corporate purchasing to be “Amazon-like.”

One way to achieve that is with BaaS.

All About the BaaS

BaaS links digital banking services, including loans, payments or deposit accounts, to nonbanks through application programming interfaces (APIs) from licensed FIs. This allows a nonbank to offer these services without a banking license of its own.

That’s what you see with the Apple Card, for example. Apple partnered with Goldman Sachs to launch the card, with the FI’s financial license enabling the tech giant to add its own data to offer credit to customers.

Given the success of the Apple Card, BaaS has clearly shifted the consumer banking experience, and it is expected to do the same now for B2B financial services.

Businesses of all sizes stand to benefit directly from leveraging APIs to tailor offerings to their business clients and consumers.

For one thing, BaaS enables brands to craft banking services to support their customers without creating their own banking division. It allows a brand to offer its customers mobile bank accounts, debit cards with rewards, loans or payment services. It makes these financial products accessible to users at the point of need.

But Wait, There’s More

Another benefit of the BaaS model is that it provides speed, flexibility and convenience in both consumer payments and B2B payments. Proponents say BaaS makes it easier for businesses to develop tools for sending and receiving B2B payments and managing financial data through APIs, artificial intelligence (AI) and cloud-based technologies. These models allow firms to implement payment and banking solutions such as digital invoicing systems.

In addition, BaaS helps businesses gather rich data. B2B payments offer rich data that can be analyzed to provide organizations with greater financial transparency and control as well as improved user experiences.

Vendors, intermediaries, suppliers and consumers alike want instant financial services digitally or through open interfaces. Following the challenges of 2020, they have a greater reliance on digital interactions, eCommerce, digital payments and remote banking.

Businesses can meet these demands and boost their participation in the growing BaaS and eCommerce industries by partnering with an FI that facilitates BaaS.

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