Banking-as-a-Service Market Expected to Reach $22.6 Billion by 2032—Allied Market Research

According to a new report published by Allied Market Research, titled, “Banking-as-a-Service Market, by Component (Platform and Service), Type (API-based Bank-as-a-service and Cloud-based Bank-as-a-service), and End User (Bank, Fintech Corporation/NBFC, and Others): Global Opportunity Analysis and Industry Forecast, 2023–2032." The banking-as-a-service market was valued at $4 billion in 2022, and is estimated to reach $22.6 billion by 2032, growing at a CAGR of 19.3% from 2023 to 2032.

Banking-as-a-service (BaaS) is an end-to-end approach that facilitates FinTech companies and other third party organizations to connect with a bank’s system employing APIs. This helps organizations to build innovative financial services upon the provider bank’s regulated infrastructure while enabling open banking services. In addition to this, various industries such as e-commerce, travel, health, telecom, and retail are using banking-as-a-service platform to boost business sales. Moreover, banking-as-a-service is mostly driven by the larger trend of digital transformation in the banking industry. Banking-as-a-service industry helps traditional banks and financial institutions to improve their digital services, optimize operations, and stay competitive in the ever-changing financial market. Now a day, traditional banks and financial institutions are adopting digital strategies.

Furthermore, the banking-as-a-service market size has expanded as a result of the boom in fintech businesses. BaaS is used by fintech companies to provide creative financial solutions, such as loans, payments, and other banking services, without being restricted by traditional systems. Moreover, one significant development in the BaaS business is the use of Application Programming Interfaces (APIs) and online banking. APIs make it easier for banking services and outside apps to integrate smoothly, giving companies access to a variety of financial features without having to develop them inside. In addition, initiatives and laws pertaining to open banking in several areas encourage cooperation and interoperability among participants in the financial system. By facilitating the exchange of financial information and services between various platforms and organizations, BaaS is consistent with the tenets of open banking.

Furthermore, major market players have undertaken various strategies to increase the competition and offer enhanced services to their customers. For instance, in July 2021, Bnkbl Ltd. partnered with Paysafe, a leading payment platform to deliver a banking as service platform. In addition, the main purpose of the partnership is to helps banks and financial institutions to reduce operation cost by using banking-as-a-service solution. Furthermore, in September 2021, Starling Bank launched a banking-as-a-service package in Europe. With the help of this offering, companies are expected to be able to create their own financial products on the banking platform, including debit cards, kids' cards, integrated digital wallets, and savings or current accounts. With built-in banking, Starling takes care of the technical and legal requirements in the background, freeing up businesses to focus on serving their customers. These strategies reflect efforts of the banking-as-a-service industry, which helps to expand its global footprint and leverage technology to deliver better services to clients.

On the basis of end user, bank segment attained the highest market share in 2022 in the banking-as-a-service market, this is attributed to the fact that in the financial sector, traditional banks enjoy a long history of trust and credibility. Owing to the trust created during years of operation, customers, particularly businesses, frequently choose to do business with established banks. Banks looking to enter the BaaS area take advantage of this confidence to get a sizeable portion of the market. Meanwhile, fintech corporations/NBFC segment is projected to be the fastest-growing segment during the forecast period. This is due to their adaptability, creativity in technology, and agility. Such organizations swiftly implement and integrate BaaS solutions as they are not constrained by old systems. As a result, they provide financial services that are customer-focused and flexible, meeting the ever changing needs of the digital economy.

On the basis of region, Europe attained the highest market share in 2022 and emerged as the leading region in the banking-as-a-service market as many European counteries have embraced open banking programs, promoting cooperation between established banks and fintech firms. Open banking fosters competition and innovation by enabling third-party suppliers to offer BaaS solutions. On the other hand, Asia-Pacific is projected to be the fastest-growing region for the banking-as-a-service market during the forecast period. This growth is attributed to the fact that a large part of Asia-Pacific is a highly tech-savvy population. Asia-Pacific has seen a rapid adoption of financial solutions. BaaS is being used by fintech companies in the area to provide creative financial services, which help the market expand quickly. The report focuses on the growth prospects, restraints, and trends of the banking-as-a-service market analysis.

The study provides Porter’s five forces analysis to understand the impact of several factors, such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers, on the banking-as-a-service market trends.

The COVID-19 had a moderate impact on the banking-as-a-service market, The COVID-19 pandemic has accelerated the adoption of Banking-as-a-Service (BaaS) as the financial industry sought digital solutions to navigate the challenges posed by the global health crisis. The increased demand for remote banking services, contactless transactions, and agile financial solutions highlighted the importance of BaaS in providing scalable and flexible digital platforms. Financial institutions, encouraged by the need for operational resilience and customer-centric services, turned to BaaS for efficient and rapid deployment of digital offerings

Key Findings of the Study

• By component, the platform segment led the banking-as-a-service market in terms of revenue in 2022.
• By type, API-Based Bank-as-a-Service segment accounted for the highest banking-as-a-service market growth in 2022.
• By end user, bank segment accounted for the highest banking-as-a-service market share in 2022.
• By region, Europe generated the highest revenue in 2022.