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Banking-as-a-service (BaaS) providers that take banking infrastructure behind the scenes are creating environments where real-time payments and other financial transactions are invisible to the consumer. This more seamless experience will lead to customers thinking less about how to fund a purchase. Consumers increasingly expect banking to work seamlessly and instantly, even as the payments ecosystem grows evermore complex. BaaS companies such as Marqueta, Novopayment, and Railsr (formerly Railsbank) offer card issuance, payment processing, and know-your-customer systems that provide seamless experiences through white-label banking and back-office services. Such turnkey banking services have enabled a slew of affinity-based neo-banks to come forward. They outsource all the regulatory burden to larger players—the BaaS providers—and quickly achieve the kind of scale that drastically improves unit economics. Setting up these banking products is so easy that backlash erupted years ago after a Kardashian-branded debit card came with exorbitant fees. Still, banking-as-a-service has matured, and remains a popular choice for startups seeking to speed their products to market.

Banking-as-a-service (BaaS)

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Financial Technology