Banking-As-A-Service Helps Corporates Monetize New Payments Flows

More than 40 percent of United States businesses received at least some of their invoices in 2019 via a form of communication that many younger generations may have trouble identifying, let alone using: fax.

This statistic is emblematic of a larger problem in the world of B2B payments. Many businesses are weighed down by antiquated, paper-intensive payment processes, even as one-touch digital payment tools have proliferated for consumers.

The flexibility, speed and convenience that characterizes consumer payments is steadily making inroads into the business world, however, thanks to the rise of the Banking-as-a-Service (BaaS) model. BaaS makes it easier for businesses and FinTechs to develop capabilities for sending and receiving payments and managing banking data through application programming interfaces (APIs), cloud-based systems and advanced artificial intelligence (AI) technologies. This is enabling firms to essentially take matters into their own hands and implement mission-specific payment and banking solutions, such as digital invoicing systems.

In the inaugural edition of the “Banking As A Service Playbook: Powering The Next Generation of FinTech Innovation” series, PYMNTS examines the trends and technologies that are helping banks, FinTechs and corporations capitalize on the shift to digital banking and payments.

Around The BaaS World

Governments around the world have established lending programs aimed at supporting small- to medium-sized businesses (SMBs) during the pandemic. These programs have met a long-running challenge in quickly getting funds to businesses, however, including delays and red tape. The Commonwealth Bank of Australia has launched a service that seeks to bring these unique types of disbursements into the digital age. The bank’s BizExpress Online program enables existing SMB customers to access pandemic-related loans through online and mobile portals “within minutes,” according to the bank.

There has been tension between the finance and technology sectors, with some established banks wary that the latter will introduce digital services that will render them obsolete. Yet, a growing share of bank executives are coming to recognize the vital role they could serve in the emerging BaaS ecosystem. A recent report by IBM found that nearly 80 percent of financial institution (FI) executives thought platform-based banking services will help them stay competitive.

The pandemic has placed unprecedented demand on the healthcare system while also creating revenue crises for many institutions because it has forced them to delay nonemergency procedures. Hospital emergency departments have reported a more than 50 percent decline in patient volumes, according to recent data, and pediatric volumes are down by approximately 65 percent. The situation has compounded a challenge with which the healthcare sector has long struggled: inefficient and complicated billing practices. It has been estimated that wasteful billing practices cost U.S. healthcare providers and insurers nearly $300 billion annually. This may help explain why most U.S. healthcare officials plan to maintain or increase investment in automation solutions, despite budgetary challenges.

For more about these and other stories, visit the Playbook’s News & Trends.

A Nordic Neo-Bank Leverages BaaS To Offer Financial Services To Small Businesses And Freelancers

BaaS collaborations often come about when entrepreneurial technology companies partner with established FIs that already possess regulatory licenses and processing capabilities. One Nordic financial startup has reversed this trajectory and decided to get its own banking license.

Denmark-based Lunar began offering a slick card app but has since transformed to collaborate with partners, launching a range of banking tools including financial management services for small businesses and freelancers. In this month’s Feature Story, Lunar chief operating officer Morten Sønderskov explains why he believes financial and technology companies are only just beginning to scratch the surface of the business pain points BaaS collaborations could address.

Deep Dive: Tapping The Trillion-Dollar Market Potential Of The Baas Model

The potential value of the BaaS market could reach nearly $4 trillion over the next decade, according to a recent report. This eye-popping estimate reflects the degree to which platform-based banking services can transform every corner of the economy, from business financing to insurance and home lending.

To learn more about the core elements of this emerging economic ecosystem and the key use cases that could transform the BaaS market potential into a reality, visit the Playbook’s Deep Dive.

About The Playbook

The “Banking As A Service Playbook: Powering The Next Generation of FinTech Innovation,” a collaboration with Transcard, explores the trends and technologies driving innovation in the BaaS space.