The financial services industry is well used to the as-a-service suffix. A service offered to incumbents by a variety of specialist third parties as well as the preferred model of operating for agile challengers, banking-as-a-service (BaaS) has grown in popularity -and looks set to solve some age-old pain points.
And the BaaS revolution may begin in cross-border payments, an area already open to hyper-innovation and benefiting from the ‘plug ‘n’ play’ API culture propelled by the Open Banking initiative.
"Previously, international businesses, such as resellers, have been subjected to slow, costly, payment flows and complex payment formats," says Christoph Tutsch, CEO of ONPEX. "This has made it difficult for businesses to communicate and transact with banks."
It’s not difficult to see why so many market participants have entered the cross-border payments sector.
"Since the implementation of PSD2, Open Banking has gained significant traction," says Tutsch. "With global competitive pressures rising and profit margins shrinking, those first to embrace the technology are now beginning to recognise the benefits of adopting BaaS solutions; with access to transparent and automated API-based solutions."
With new participants entering the ever-growing software market wielding the latest and greatest technological trends, Open Banking and an emerging API culture provide the perfect breeding ground for innovative service models.
“BaaS goes hand in hand with Open Banking,” says Tutsch. “Open Banking relies on the collaboration of financial institutions, service providers and customers based on APIs. BaaS uses such APIs to provide simple access to banking and payment products and to meet regulatory requirements.
“BaaS platforms reduce the need for businesses to invest in their own technology and screening mechanisms as these platforms carry out all the processes needed for financial and regulatory operations.”
But for Tutsch, the real reason the BaaS model is set to become the standard is regulation.
“Compliance is built into our BaaS platform, allowing ONPEX customers to meet all requirements of the latest regulations, including; PSD2, GDPR, and AML4.
“Our customers can focus on their core business and are better equipped to penetrate highly regulated markets, as our platform helps them to seamlessly translate their services into these environments,” he says.