Banking-as-a-service (BaaS) has grown massively over the past few years, and it is undeniably a cornerstone of the future of fintech in the finance industry. With consumers forced to shop, bank, and borrow primarily online since the COVID-19 pandemic, the demand has skyrocketed for fintech solutions.
Despite its youth, there have been several massive developments in the BaaS industry. From simple online banking evolving into fleshed-out banking apps for almost every major bank to near-instant financing at the point of sale at countless online retailers, BaaS has already seen many changes as it has become the giant that it is today. Tracking and responding to these trends has helped lenders and merchants get a competitive edge in their respective markets.
So, today we are going to discuss some of the current banking-as-a-service trends, like:
Let’s dive into each banking-as-a-service trend and how they may affect the industry.
While embedded financing has been growing for the past few years, it is projected to continue even more aggressively in the future. In fact, the embedded finance market is projected to be worth $138 billion by the year 2026. This represents almost $100 billion in growth over five years, as the market size was only $41 billion by the end of 2021.
This continued growth is likely to change the landscape of online shopping completely, setting the expectation that most major merchants offer some form of financing through their checkout pages. Those that don’t may find themselves left behind, as online shoppers find it very easy to swap to a vendor that offers them the flexibility they need.
With the increased market size of fintech, capital investment has also been growing. More fintech startups are sprouting up to cover the many different functions of BaaS, and they continue to attract venture capital funds due to the temperature of the market.
Now, capital investment did drop a bit in 2022 relative to 2021, and that trend is likely to continue into 2023, but this is more about selectiveness than it is about the efficacy of investing in fintech startups. In contrast to the “shotgun” approach that investors took in order to get involved in any way they could when fintech exploded in 2021, they are now more focused on firms that are offering the best and newest services and financial products (like embedded finance).
As fintech firms have pulled ahead of more traditional financial institutions in terms of growth, they have successfully turned the head of regulators in the nations with the largest markets.
The regulations that are most likely to come include:
In most developed nations, these regulations have long been applied to the banks and lenders that fintechs were competing with. As a result, it is only natural that they are eventually applied to fintechs to cool off the market and ensure that consumers are safe to get financing from any source that is convenient and flexible without risking their financial safety.
These banking-as-a-service trends will most likely improve the industry, as it will ensure that more consumers are left with a good impression of the services they use and that any bad actors are weeded out.
Skeps offers a comprehensive, end-to-end consumer financing platform that helps businesses modernize their entire payment process. Working with an entire network of established lenders, we go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:
If you’re looking to partner with a forward-thinking fintech company that will keep consumers' eyes on the purchase while offering best-in-class financing, Skeps is the perfect fit.
Do you have more questions about how to adapt to these new banking-as-a-service trends? Request a demo today or email us at support@skeps.com.