APIs Drive Banking and Fintech as Services

The increasing demand for the digitization of financial services and the accessibility provided by application programming interfaces has helped propel the market expansion of banking as a service(BaaS) and the related fintech-as-a-service (FaaS). These invaluable cloud-based tech products and services provide software, business,infrastructure, and banking platforms, all empowered by APIs.

In the current financial services ecosphere, cloud-based computing for everyday banking operations has become a technological enabler. Allied Market Research maintained the global banking-as-a-service market generated $2.41 billion in 2020, and projects it to reach $11.34 billion by 2030.

Another cloud-based tech service taking off is fintech-as-a-service (FaaS). Grand View Research places the global FaaS market size at $232.14 billion in 2021 and a study by market research firm,Fact.MR expects a 17% compound annual growth rate (CAGR) from 2022 to 2032.

Relieving Banking Pressures

Cloud-based banking enables financial institutions to control core banking operations and financial services without dedicated physical servers. Some of the distinctive cloud service models in banking include:

  • BaaS, which allows non-banks to offer core financial services to their customers by integrating with financial institutions via APIs. Embedded bank services include payments, loans and credit cards.
  • FaaS, which automates and improves the banking customer experience as well makes financial operations management easier. FaaS has already made it possible to invest, borrow, transfer, and save funds virtually.
  • Business process-as-a-service(BPaaS), which covers everyday operations like billing and human resources.
  • Infrastructure-as-a-service(IaaS), a complete core banking frame that handles business operations and software integrations.
  • Platform-as-a-service (PaaS),core banking platforms for app and database development.
  • Software-as-a-service (SaaS),banking software for accounting, invoicing, customer relationship management, etc.

Drivers Underpinning Cloud Services

The pressure on banks and credit unions to offer more competitive, innovative and user-friendly products and services stems from the increasing number of nonbank companies offering financial services, such as digital financial accounts, wallets, payments, and lending.Tech-informed legacy financial institutions can defend against this advancing threat by integrating FaaS or BaaS, where financial institutions make theirAPIs available to outside developers so they may build new services and offer account holders more options.

These cloud-based tech solutions include platforms for fraud prevention, open banking, card issuing, digital payment processing, data analytics, and robotic process automation. Financial institutions, in particular, seek ways to easily deploy these technological advancements in their products and services.

FaaS can deliver a complete group of integrated payments, financial and business services capabilities inserted into any application. In payments, for example, this can deliver the capacity to collect and disburse funds, issue cards, develop digital wallets, and implement know your customer (KYC) and compliance procedures more capably.

More Agile Than In-House Platforms

Many fintech companies want to partner with financial institutions to easily dispense their technology. The new breed of third-party APIs frees developers from locking to any particular platform and allow them to bring their applications more efficiently to market.

Undoubtedly, fintechs also offer traditional financial institutions a range of new tech offerings, typically as software integrated into their systems through APIs, with the platforms capable of integrating seamlessly with the financial institutions’ back-offices.

Financial institutions and other financial services businesses can experience fully developed, cutting-edge processes created by technology specialists, which they can access through APIs in the form of FaaS.

A number of banks and credit unions have already accepted the notion of consumer enablement by delivering a seamless experience enabled by open finance, BaaS, and FaaS, which allows them to share financial data across financial solutions, products and platforms. A Finastra survey found 78% of respondents believed shared data and infrastructure will become the norm across the industry.

Many traditional financial institutions, however, still operate outdated pieces of legacy systems — including core systems — that are not compatible with modern fintech. This can be a big issue in implementing the cloud-based tech models as it would hinder third-party integrations.

In addition, the Implementation of BaaS or FaaS, usually circulated to clients via APIs, should center on the security and ease of integration and the capability to deliver maximum business value.

Kinective’s API connectivity provides a best-of-breed connectivity solution for financial institutions and fintechs. Kinective’s vendor agnostic OmniConnect Platform, the premier open banking marketplace for all API needs, uses cutting-edge cloud technology to connect fintech solutions to financial institutions, ensuring that Kinective clients have the most secure and reliable integration environment in the industry. Kinective has connectors built for as many as 40 different banking core accounting systems, including systems from Fiserv, Jack Henry and FIS, with many of them requiring connectivity to multi-core versions.