Banking as a Service Market Size, Share, Growth & Industry Analysis, By Enterprise (Large Enterprise, Small & Medium Enterprise), By End-User (Banks, NBFC, Government) and Regional Analysis, 2023-2030

Banking as a Service Market Size

The global Banking as a Service Market size was valued at USD 540.86 billion in 2022 and is projected to reach USD 3863.91 billion by 2030, growing at a CAGR of 28.78% from 2023 to 2030. In the scope of work, the report includes solutions offered by companies such as Solaris SE, Currencycloud, Bnkbl Ltd trading as Bankable., Prime Treasury Services PTY. LTD, Green Dot Corporation, MatchMove Pay Pte Ltd, PayPal Holdings, Inc., Sopra Banking Software, Treezor, Twilio Inc.  and Others.

Banking as a Service is enabled through the seamless integration of financial services and products into non-financial digital platforms, which are commonly used by customers for various activities, such as retail, e-commerce, travel, health, and telecommunication services. This allows non-banking financial companies to offer financial products and services under their own brand, creating a more immersive customer experience. In order to achieve this, financial institutions can leverage affordable, scalable, and cloud-native technology to develop a platform that can offer these services, with the added benefit of reducing costs associated with serving consumers.

The financial sector's growth may be hampered by the increasing number of cyberattacks targeted at personal banking data belonging to clients. Such attacks can substantially affect customer trust and confidence levels in the industry, potentially resulting in reduced adoption of digital banking services. Therefore, it is crucial for banking institutions to allocate considerable resources towards cybersecurity measures to safeguard customer data, as well as preserve their trust. Neglecting to do so can result in a significant decline in the growth of the finance industry.

For instance, Equifax, one of the three largest credit bureaus in the US, suffered a massive data breach of sensitive private data belonging to nearly 143 million individuals. The breach, eventually attributed to inadequate cybersecurity measures and severely impacted the trust of customers in Equifax, leading to a considerable decline in the company's market value and reputation.

Analyst’s Review

Banking as a Service (BaaS) has increasingly gained momentum in recent times, offering unique advantages to financial institutions and technology providers who aim to offer banking products and services as neobanks. Neobank providers such as Chime, Varo, and Affirm have identified specific markets to cater to with their offerings but require bank partners due to the lack of authorization to operate as banks. This partnership model, in which neobanks can offer their products and services and earn revenue on fees passed to customers as well as loan spreads and interchange income, is tied to the bank's ability to hold the loan and/or deposit balances on their books.

Partnering with technology providers grants them access to their bank charter and income from the interchange that they share with the Neobank. BaaS has proved to be an effective business model in the financial sector, promoting collaboration among different players in the industry to introduce innovative and user-friendly banking solutions.

Market Definition

Banking as a Service (BaaS) is a business model that encourages partnerships between financial institutions and technology providers to offer banking products and services. In such collaborations, Neobank providers can pitch their products and services to specific markets while leveraging bank licenses.

Through BaaS, Neobank providers benefit from earning income through fees charged to customers, loan spreads, and interchange income. Banks, on the other hand, reap the benefits of holding loan and deposit balances, sharing interchange income, and receiving payments from technology providers for access to their bank charter.

BaaS has become increasingly popular, facilitating cooperation and innovation in the financial sector. By introducing new and user-friendly digital banking services, it has impacted a broader range of customers, especially the underbanked.

BaaS is predicted to be an essential component in promoting financial inclusion and innovation as the financial industry evolves. However, compliance with regulatory standards is crucial to maintain trust and continuity in the financial sector.

Banking as a Service Market Dynamics

The adoption of BaaS in financial services is playing a critical role in driving market growth. The increased usage of financial services, including banking, stock exchange, portfolio management, wealth management, and insurance, indicates a growing trend toward digital transactions in banking. The digital revolution has gained momentum in recent years due to the proliferation of internet services, which has translated into higher rates of BaaS adoption among mobile-based users and business owners adopting digital technology in the banking sector.

Additionally, banks are partnering with FinTech companies to offer BaaS products and services, which has resulted in increased revenue, reduced costs, and enhanced customer satisfaction. Such collaborations have generated innovative banking platforms, facilitating more efficient banking services while improving customer experience. Ultimately, the digital shift toward BaaS models has presented a significant opportunity for the banking industry to reposition itself for the future.

The Banking as a Service (BaaS) sector is experiencing some challenges due to the high initial costs of adopting its technologies. The feasibility of small- and medium-sized enterprises (SMEs) to afford these initial expenses is not that easy. While some experts contend that these costs put undue pressure on such enterprises, others assert that companies could take advantage of these technologies at a much lower cost and much earlier in their growth trajectory.

Moreover, the high initial costs associated with BaaS technology have become a notable challenge for the market's growth, the innovation, financial inclusivity, and collaboration potential of BaaS technology make it a crucial component for the banking industry's future.

Segmentation Analysis

The global market is segmented based on enterprise, end-user, and geography.

By Enterprise

Based on the enterprise, the banking as a service market is bifurcated into large enterprise and small & medium enterprise. The large enterprise segment dominated the market share of 66.17% in 2022. Large enterprises are increasingly adopting banking as a service, as it offers financial services without requiring extensive tech development or regulatory compliance. This can result in lower costs and faster time-to-market for financial offerings, allowing businesses to meet the evolving needs of customers more efficiently. Moreover, integrating banking services into current platforms and workflows is becoming crucial for companies to remain competitive in light of the growing prevalence of embedded finance and FinTech capabilities.

By End-Use

Based on end-users, the banking as a service industry is categorized into banks, NBFC, and government. The banks segment dominated the market share of 57.79% in 2022. Banks are both major users and providers of banking as a service. They leverage this service to reduce operating costs, scale their operations, and provide a wider range of financial offerings to their customers. By outsourcing services and partnering with other financial institutions, banks can focus on their core competencies while remaining compliant with regulations. The flexibility and scalability of banking as a service make it an appealing option for banks looking to improve their efficiency and remain competitive in an ever-evolving market.

Banking as a Service Market Regional Analysis

Based on regional analysis, the global banking as a service market is classified into North America, Europe, Asia-Pacific, MEA, and Latin America.

The Europe Banking as a Service Market share stood around 37.73% in 2022 in the global market, with a valuation of USD 204.07 billion. Banking as a service is a global trend, with financial institutions worldwide leveraging it to improve their operations and customer offerings. The adoption of banking as a service varies depending on factors, such as market demand, regulatory environment, and technological capabilities, rather than specific geographic regions.

Competitive Landscape

The global banking as a service industry report will provide valuable insight with an emphasis on the fragmented nature of the global market. Prominent players are focusing on several key business strategies such as partnerships, mergers & acquisitions, product innovations, and joint ventures to expand their product portfolio and increase their respective market shares across different regions. Expansion & investments involve a range of strategic initiatives including investments in R&D activities, new manufacturing facilities, and supply chain optimization.

List of Key Companies in Banking as a Service Market

• Solaris SE
• Currencycloud
• Bnkbl Ltd trading as Bankable.
• Prime Treasury Services PTY. LTD
• Green Dot Corporation
• MatchMove Pay Pte Ltd
• PayPal Holdings, Inc.
• Sopra Banking Software
• Treezor
• Twilio Inc.

Key Industry Developments

• May 2022 (Expansion) - Oracle FS secured new deals for its Flexcube core banking system with Caixa Economica da Misericordia de Angra do Heroismo in Portugal and Signature Bank, a FinTech start-up, in Nigeria. The historic Portuguese bank will use a range of Oracle FS solutions, while the Nigerian start-up will implement Flexcube to support its operations.
• September 2022 (Acquisition) - Jack Henry acquired Payrailz, a company that provides advanced digital payment solutions. With this move, Jack Henry strengthened its payments ecosystem and bolstered its payments-as-a-service strategy. This takeover aligns with the company's open banking approach and supports the integration of embedded finance and FinTech capabilities.

The global Banking as a Service Market is segmented as:

By Enterprise

• Large Enterprise
• Small & Medium Enterprise

By End-Use

• Banks
• NBFC
• Government

By Region

• North America
  • U.S.
  • Canada
  • Mexico
• Europe
  • France
  • UK
  • Spain
  • Germany
  • Italy
  • Russia
  • Rest of Europe
• Asia-Pacific
  • China
  • Japan
  • India
  • South Korea
  • Rest of Asia-Pacific
• Middle East & Africa
  • GCC
  • North Africa
  • South Africa
  • Rest of Middle East & Africa
• Latin America
  • Brazil
  • Argentina
  • Rest of Latin America