Banking-as-a-Service (2022)

1. 1. Startup overachievers: from specialists to full-service

   → BaaS startups often start as specialists for specific services within the banking tech stack. They may then be snapped up by BaaS incumbents looking to offer a fuller range of services.

   → More and more BaaS startups are trying to integrate several capabilities from the outset, combining card issuing, deposits and know-yourcustomer (KYC) services, for example.

2. 2. In it together: interdependency rises

   → BaaS startups allow banks to focus on customer service innovation and better compete with neobank rivals.

   → As their interdependence deepens, banks are becoming increasingly proactive in their engagement with startups. Some run their own accelerators, startup competitions or scouting networks.

3. 3. Blessing or curse: prohibitive cost models

   → It has never been easier to get a fintech up and running. But for mature fintechs, BaaS infrastructure — which often charges per user — can be prohibitively expensive.

   → Monzo, for example, retroactively built its own tech stacks to cut costs. To appeal to larger clients, BaaS startups may have to rethink their business models.

4. 4. Pump up the BaaS: New areas for innovation

   → PSD2 and open banking broke down the first regulatory barriers to innovation. But this may only be the beginning, as both the EU and the UK are moving towards open finance.

   → This would open up access to financial data beyond bank account information, like savings, pensions, insurances and mortgages — and could usher in a new wave of BaaS startups.

Who early stage startups are up against