Across industries, technology has democratised access to new experiences, products and services. In finance, for example, new technologies enable non-financial businesses, startups and third parties to access legacy systems and data at an increasing rate. This phenomenon allows for the concept of Banking as a Service (Baas). With BaaS, fintechs use bank products and services to reach customers and drive financial inclusion.

Baas has many definitions, but its concept is simply integrating financial services and products into other offerings for customers and non-financial institutions.

What is BaaS

BaaS is the provision of banking products and services through third-party distributors. BaaS providers help non-banking businesses with financial infrastructure, allowing them to deliver their products faster to the market. In most cases, a school of thought believes that the financial infrastructure BaaS provides is through an API or cloud platform. The Banking services BaaS platforms offer include loans, payment processing, depositing account etc.

What Baas does

Let's take, for example, a hotel chain that is looking to improve its customers' experience; it came up with the idea of a debit card or some wallet function where its customers can make payments. There are also loyalty points for customers anytime they use this card or wallet function. To further improve customer loyalty, this hotel chain also came up with the idea of an online loan system for people to book hotels, allowing them access to its service even when they can't afford it at that moment.

With these two ideas, this hotel chain can improve customer loyalty and foster an intimate relationship with its customers. But there's a problem, a big problem; this hotel chain does not have a banking licence. Without one, this hotel chain cannot offer cards or loans.

Getting a bank licence is not easy because of how critical banking services are to the economy. Acquiring a licence is capital intensive and comes with stringent regulatory requirements.

To avoid all these challenges and still offer those services to your customer, this hotel chain has to turn to a BaaS provider. This scenario is where BaaS comes into play.

This hotel chain has to partner with a BaaS provider that can make these services available to its customers via APIs and webhooks. With these APIs, the hotel chain can 'hold' customers' money and lend them money too. In the real sense of this scenario, the hotel chain is not holding the money, nor is it loaning its money to its customers. Instead, it's simply acting as an intermediary; as an intermediary, the hotel chain does not have the burden of the regulatory duties of a bank.

BaaS and Open Banking

Open Banking is another of those buzzwords that fly around in the fintech industry, and it is often used interchangeably with BaaS, which is wrong.
While BaaS integrate banking services into non-bank products, Open Banking is when non-banks use bank data for their products. For example, a financial management platform needs the data of its customers from different banks to help them manage their finances. Note that this financial management platform is not performing any banking service; instead, it is just using data from banks to deliver personalised services to its customers.

In Africa, fintechs have dominated the BaaS market, taking advantage of digital and cloud technology, opening banking and API and rising customer expectations to deliver these services to businesses across sectors.

Fincra as a BaaS provider

Fincra offers BaaS for businesses helping them to build and launch their embedded payment features. Fincra provides banking services for people on an API level. With Fincra BaaS APIs and robust payment solutions, businesses and fintechs can embed payment services into their software. These platforms can offer various payment services like collecting payments from customers and disbursement.

Fincra provides banking services for platforms on the API level, and our core mission is to build API infrastructure that connects Africa to the rest of the world.
With Fincra's APIs, platforms can build quick and seamless financial applications for scalability across Africa and the rest of the world.

Get in touch with our team to learn more about how your platform can use Fincra for its payment solutions.