The Global Banking as a Service (BaaS) Platform Market is expected to reach USD 4,236.3 million in 2024. Demand for banking as a service platform is projected to rise at an astronomical CAGR of 14.7% from 2024 to 2034. Further, the banking as a service platform market analysis forecasts the market to surge to USD 16,664.6 million by the end of the year 2034.
BaaS is an end-to-end model that allows digital banks and other third parties to connect with banks’ systems directly via APIs so they can build banking offerings on top of the providers’ regulated infrastructure, as well as unlock the open banking opportunity reshaping the Europe financial services landscape.
The banking as a service platform (BaaS) platform provides the software that ensures safe communication of data between the traditional bank and a business/ fintech company.
Global Banking as a Service Industry Assessment
| Attributes | Key Insights |
|---|---|
| Historical Size, 2023 | USD 3,717.5 million |
| Estimated Size, 2024 | USD 4,236.3 million |
| Projected Size, 2034 | USD 16,664.6 million |
| Value-based CAGR (2024 to 2034) | 14.7% |
With banking as a service platform, banks/financial services providers can focus on their core capabilities-delivering products, services and experiences while leveraging software providers’ expertise, functionality, infrastructure, platform and scale. This leads to reduced development time, cost, and a unified view of the customer by leveraging a common platform across most products and services.
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The below table shows the expected CAGR for the global virtual event platforms market over few semi-annual periods, which covers 2024 to 2034. In the first half (H1) over the years from 2023 to 2033, the business is predicted to surge at a CAGR of 16.2%, followed by a marginally higher growth rate of 16.6% in the second half (H2) of the same decade.
| Particular | Value CAGR |
|---|---|
| H1 | 14.6% (2023 to 2033) |
| H2 | 14.4% (2023 to 2033) |
| H1 | 14.4% (2024 to 2034) |
| H2 | 15.0% (2024 to 2034) |
Moving into the subsequent period, from H1 2024 to H2 2034, the CAGR is projected to increase to 15.9% in the first half and remain relatively moderate at 16.8% in the second half. In the first half (H1) the market showcased a decrease of 20 BPS while in the second half (H2), the market witnessed an increase of 60 BPS.
Collaboration of Banks and Fintech Firms to Provide Cutting-Edge Financial Services and Products via Banking as a Service Platforms.
The introduction of fintech companies like Stripe, expanded their banking as a service platform offerings post 2021, which is providing the push needed for BaaS services market growth. Stripe treasury allows platforms to embed their financial services into their products, through its partnership with Goldman Sachs.
This has been quite crucial to enable a wide range of businesses, ranging from e-commerce platforms to gig economy companies to offer banking services without becoming banks themselves.
On the other hand, in 2022, Google Cloud teamed up with fintech startup Plaid to create a BaaS solution that connects with various financial institutions. This collaboration enables fintech firms to provide customized financial services using the resources of traditional banks, ultimately speeding up the introduction of new financial products to the market.
In 2022, PayPal increased its BaaS services by adding a high-yield savings account feature, aiming at people without regular bank accounts. This step not only expanded PayPal's range of services but also filled a notable void in financial inclusion, showing how fintech advancements are pushing the growth of BaaS into new customer groups.
Fintech's use of APIs and cloud technology is speeding up the BaaS market by making it easier to add financial services to non-financial platforms. For example, Solarisbank expanded its API-driven banking as a service platform across Europe in 2023, allowing banking services to be seamlessly integrated into different industries, like retail and travel, without having to create new banking infrastructure from the beginning.
Increased Competition & Improved Customer Experiences to Propel the Sales
Major players in the market are focusing on providing customers the advanced financial services with next level customer experiences. For instance, Apple introduced Apple Pay Later in partnership with Goldman Sachs in 2022. This not only broadened their range of services but also improved the customer experience by offering smooth, integrated financial solutions within their current setups.
At the same time, traditional banks are now utilizing banking as a service platform to stay competitive with the rise of fintech and non-banking firms. For example, JP Morgan invested heavilty in creating its banking-as-a-services platform, forming partnerships with fintech companies to provide tailored financial services.
This strategy helps the bank attract new customers and offer tailored financial products, leading to better customer satisfaction and retention.
Also, the fact that e-commerce platforms like Shopify are getting into financial services highlights how better customer experiences are affecting the BaaS market. Shopify teaming up with Stripe to provide banking services to merchants is a great example of how offering convenient access to financial tools within business platforms improves the overall user experience, leading to greater loyalty and growth.
These instances show that as competition grows, businesses in different industries are using BaaS more to stand out and make customer experiences better. This trend is changing not only the financial services industry but also driving the fast growth of the banking as a service platform market worldwide.
Banking as a Services Providers Face Data Security & Privacy Challenges.
Incidents of cyber-attacks and data breaching pose a major challenge in the banking as a service platform market. Cyberattacks like Bank of Brazil in 2022, which targeted their online systems and customer data highlights that the industry faces tough challenges regarding data privacy and cybersecurity.
BaaS providers, who give basic banking services through APIs, are especially at risk because their systems are interconnected, making them appealing to cybercriminals.
A big challenge in keeping client information safe in the BaaS sector is the use of third-party vendors. These vendors handle important parts of the banking system, like storing data and processing transactions. If any of these third-party systems are hacked, it could give unauthorized access to sensitive client info, like personal and financial data.
This makes the risk of attack higher, so everyone involved in the banking as a service platform landscape needs to follow strict security rules.
The fast shift towards digital banking has brought in cloud services and mobile platforms, which make things easier but also create new security problems. For instance, in 2023, a breach with a cloud service provider caused millions of customer records from a top European fintech company to be exposed.
This incident shows the challenges BaaS providers deal with in keeping data safe in various settings and following global data protection rules like GDPR and CCPA.
Using AI and machine learning for fraud detection and other automated tasks in BaaS can be good but also risky. These technologies can improve security, but if not well protected, they can also give attackers a way in. Balancing innovation with strong cybersecurity is a big challenge for BaaS providers in keeping client trust and protecting data privacy.
Integration of Decentralized Finance (DeFi) with Banking as a Service Platforms
Traditional banks can use DeFi along with banking as a service platform to provide decentralized financial services. These banks would be able to do this without dealing with the challenges of blockchain technology. It would provide BaaS providers a chance to improve their services, appeal to tech-savvy customers, and compete with fintech firms. Additionally, these integrations help banks diversify their revenue by entering the fast-growing DeFi market.
For example, partnership between Sygnum Bank and decentralized finance (DeFi) protocols showed how DeFi and Banking as a Service platforms are working together. Sygnum, a digital asset bank, joined with Aave Arc, a controlled version of the popular DeFi lending platform, so that institutional clients could use DeFi opportunities within a regulated framework.
This teamwork demonstrated how banking as a service platform can use DeFi's new financial products, like decentralized lending and borrowing, to provide better services to their customers.
Principal Consultant
Banking as a service industry grew with the CAGR of 13.9% during the historical period between 2019 and 2023. The market was valued at USD 2,207.0 million in 2019 and forecasted to reach a value of USD, 3,717.5 million in 2023.
During this time, the increased shift towards digital banking solutions, driven by consumer demand for change and the need for efficient and convenient financial services Besides, change legislation such as PSD2 (Revised Payment Services Directive) encouraged innovation and competition in terms of increasing economies of partnership and collaboration between traditional banks and fintechs, using BaaS platforms to deliver advanced services and improve the overall experience.
On the other hand, the market is estimated to grow at a CAGR of 14.7% during the forecasted period between 2024 and 2034. The market is expected to grow swiftly as it has a potential to reach a value of USD 16,664.6 million in 2034 from USD 4,236.3 million in 2024.
As the economy undergoes digital transformation, BaaS platforms are set to become widely adopted across the globe. The increasing demand for swift and personalized banking services, is expected to fuel the growth of the non-financial BaaS market.
With technology evolving, banking as a service platform are predicted to play a key role in helping financial institutions adjust to changing customer needs and regulations, making them an essential part of the financial services industry in the next ten years.
Tier-1 vendors dominate the banking as a service platform market with holding the market share in the range of 35% to 40% globally. These vendors provide end to end services and focus on high level integrated solutions. These companies include Q2 Software, Inc., Starling Bank, Goldman Sachs and others.
Tier-2 vendors are those companies which hold a significant but smaller market share compared to tier-1 vendors. Usually these vendors provide services to Tier-1 vendors rather than customers directly. These vendors hold around 20% to 25% of market share on the global level. These companies include Bnkbl Ltd., Sterling National Bank, Clearbank Ltd. and others.
Tier-3 vendors are usually smaller companies with limited resources and these companies focus on providing basic services. These vendors hold around 35% to 40% market share in the market. These companies include Technisys, Treasury Prime, Unit Finance, Inc. and others.
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The section below includes the industry analysis of banking as a service platform market over the countries in North America, Latin America, East Asia, South Asia & Pacific, Western Europe, Eastern Europe and Middle East & Africa. The analysis describes the country wise analysis that are expected to grow at a high CAGR.
| Countries | Value CAGR (2024 to 2034) |
|---|---|
| USA | 14.8% |
| KSA | 18.2% |
| Germany | 13.9% |
| India | 20.5% |
| China | 14.4% |
Major banks like Deutsche Bank and Commerzbank in Germany have adopted digital changes and launched platforms that use BaaS to provide smooth, built-in financial services. For example, Deutsche Bank's partnership with FinLeap in 2022 showed the move towards BaaS, letting non-financial companies include banking features directly in their products.
Similarly, Solarisbank, a leader in the German BaaS scene, expanded its services in 2023, attracting fintechs and tech companies wanting to offer banking products without having to be a licensed bank. The growth of digital-only banks and neobanks like N26, which uses BaaS to offer new financial solutions, shows the increasing demand.
With help from regulations like PSD2, which promotes open banking, BaaS integration has gained more support by allowing outside providers to securely access bank customer data. Because of these changes, Germany's financial industry has seen a rise in BaaS-driven partnerships and innovations, putting the country at the forefront of the digital banking revolution in Europe.
The BaaS market in the USA is growing fast because people want more digital financial options. Both new and traditional banks are investing a lot in this area. More people are choosing digital banking first, which has made BaaS adoption grow even faster. The success of neobanks like Chime and Varo shows this.
The partnership between Google and Citibank in order to offer digital banking services provides insights how technology companies and banks are working together in the landscape. Rising interest in decentralized finance (DeFi) and blockchain integration is driving innovation in the BaaS ecosystem. This is pushing USA banks to adopt more flexible and technology-driven approaches to stay competitive.
The Reserve Bank of India (RBI) has focused on financial inclusion through initiatives like UPI in the country. This has created a resourceful background for BaaS platforms. The introduction of open banking structures enables the fintech companies to provide tailored financial services.
For example, fintech companies like Razorpay and Cashfree leverages APIs to integrate its solutions with traditional banks. On the other hand, the rapid increase in digital payments post Covid-19 has also proved to be one of the factors behind acceleration of embedded finance demand. Companies such as PhonePe nailed their dominance on this trend by embedding banking services directly with their ecosystems.
| Solution | Banking as a Service Platform |
|---|---|
| Value Share (2034) | 45.7% |
Banking as a service (BaaS) platforms have changed traditional banking. They provide a flexible and agile system for banks to create digital banking services. These platforms improve customer experiences, assist in quick innovation and make operations more efficient. For instance, Zolve, an Indian startup launched a BaaS platform for cross border banking services in 2022.
| End User | Banks |
|---|---|
| Value Share (2034) | 34.5% |
In the modern era, banks are leveraging banking-as-a-service platforms to keep their competitiveness in the financial sector. Through this, they are able to provide their services to a broader range of customers. The banks are also focusing on integrating their services with latest financial technologies to produce maximum revenue. For instance, JP Morgan formed partnership with several fintech companies in 2023 to provide banking services non-banking platforms.
In terms of Solution, the industry is segmented into Banking as a Service Platform, Banking as a Service APIs and Services.
The Enterprise Size is segregated by Small & Mid-sized Enterprises and Large Enterprises.
The End User is classified by Banks, FinTech Corporations, Investment Firms and Others.
Key countries of North America, Latin America, East Asia, South Asia & Pacific, Western Europe, Eastern Europe and Middle East and Africa (MEA) have been covered in the report.
The global banking as a service platform industry is projected to witness CAGR of 14.7% between 2024 and 2034.
The global banking as a service platform industry stood at USD 3,717.5 million in 2023.
The global banking as a service platform technology industry is anticipated to reach USD 16,664.6 million by 2034 end.
South Asia & Pacific is set to record the highest CAGR of 19.5% in the assessment period.
The key players operating in the global banking as a service platform industry include Texas Instruments, Goldman Sachs, Bnkbl Ltd, Solarisbank AG, Treezor, Q2 Software, Inc. among others.
1. Executive Summary 2. Market Introduction, including Taxonomy and Market Definition 3. Market Trends including Macro-economic Factors, Market Dynamics, and Recent End-User Developments 4. Pricing Analysis, By Solution 5. Global Market Demand Analysis 2019 to 2023 and Forecast 2024 to 2034, including Historical Analysis and Future Projections 6. Global Market Analysis 2019 to 2023 and Forecast 2024 to 2034, By Solutions 6.1. Banking-as-a-Service Platform 6.2. Banking-as-a-Service APIs 6.3. Services 7. Global Market Analysis 2019 to 2023 and Forecast 2024 to 2034, By Enterprise Size 7.1. Small & Mid-Sized Enterprises 7.2. Large Enterprises 8. Global Market Analysis 2019 to 2023 and Forecast 2024 to 2034, By End-User 8.1. Banks 8.2. FinTech Corporations 8.3. Investment Firms 8.4. Others 9. Global Market Analysis 2019 to 2023 and Forecast 2024 to 2034, By Region 9.1. North America 9.2. Latin America 9.3. East Asia 9.4. South Asia & Pacific 9.5. Western Europe 9.6. Eastern Europe 9.7. Middle East and Africa 10. North America Sales Analysis 2019 to 2023 and Forecast 2024 to 2034, by Key Segments and Countries 11. Latin America Sales Analysis 2019 to 2023 and Forecast 2024 to 2034, by Key Segments and Countries 12. East Asia Sales Analysis 2019 to 2023 and Forecast 2024 to 2034, by Key Segments and Countries 13. South Asia & Pacific Sales Analysis 2019 to 2023 and Forecast 2024 to 2034, by Key Segments and Countries 14. Western Europe Sales Analysis 2019 to 2023 and Forecast 2024 to 2034, by Key Segments and Countries 15. Eastern Europe Sales Analysis 2019 to 2023 and Forecast 2024 to 2034, by Key Segments and Countries 16. Middle East and Africa Sales Analysis 2019 to 2023 and Forecast 2024 to 2034, by Key Segments and Countries 17. Sales Forecast 2024 to 2034 By Solutions, Enterprise Size, End-User for 30 Countries 18. Competition Outlook, including Market Structure Analysis, Company Share Analysis by Key Players, and Competition Dashboard 19. Company Profile 19.1. Goldman Sachs 19.2. Sopra Banking Software 19.3. Bnkbl Ltd 19.4. Treezor 19.5. Solarisbank AG 19.6. Clearbank Ltd 19.7. Q2 Software, Inc. 19.8. Green Dot Corporation 19.9. Webster Bank 19.10. BBVA S.A. 19.11. Unit Finance, Inc. 19.12. Starling Bank 19.13. Treasury Prime 19.14. ADVAPAY OÜ 19.15. Technisys
Technology
April 2024
REP-GB-19510
388 pages
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Banking as a Service (BaaS) Platform Market
