Banking as a Service (BaaS): the best way to have your own bank

As companies seek to innovate their business models, consumer demand for more convenient, personalized and easy-to-use financial services is growing. It is in this context that the Banking as a Service (BaaS) – the solution for any company that wants to offer financial services without becoming a bank – has been revolutionizing the offering of financial products, not only in Latin America, but around the world.

 Thanks to the advancement of technology and the digitalization of financial services, today it is possible for any company, from any segment, to offer banking services without necessarily becoming a bank. All this with the help of Banking as a Service.

But, what are the advantages of this business model? What is it Banking as a Service and how does the model facilitate this journey? And how has BaaS advanced in Latin America? It is these and other questions that we address in this article. Follow along!

 

What is Banking as a Service (BaaS)?

 

Banking as a Service is a solution that allows any company or institution to have its bank, with its brand and business model, quickly and without complications. Simple as that.

Through a digital account and a flagged card integrated into one application, the platform offers users the complete experience of a digital banking, which can be aimed at different audiences: employees, customers, suppliers, channels, among others.

For the contracting company or institution, the Banking as a Service plays the role of payment institution and the issuer, taking responsibility for operations, licenses, compliance, legislation, technology and security – that is, throughout the regulatory and technical part, so that companies can focus only on what really matters: attracting, relating to and retaining customers.

As an example, see below the BaaS model developed by Dock. Based on a process cards framework from different card brands, it provides a bank experience based on a Core (Prepaid issuing + Salary account) and a Financial APIslayer that works as a big rapidly-evolving functionality aggregator (offering services such as wire transfers, peer-to-peer (P2P), mobile recharge, bill payment, among others):

Without such a platform, developing and managing the entire means of payment chain for a digital bank can become quite burdensome, since it involves:

• Technology to be used;
• Commercial agreements for providing services such as bill payment and prepaid phone charging;
• Conciliation models;
• Relationships with card brands;
• Licenses and regulations;
• Upfront investment;
• In-house expertise on operating as a bank.

The whole process documented above can take a long time and would only be affordable in scale.

However, Banking as a Service spares companies of all that work, since it takes charge of all interactions with regulators, while it also has an issuer license and all agreements negotiated for services like bill payment, prepaid phone charging and more.

Simply put, BaaS is the perfect model for organizations that want, within a few weeks and without worrying about regulatory barriers, to start offering financial services to their customers.

 

What services can be offered through BaaS?

 

As we have seen, the Banking as a Service revolutionizes the financial sector by allowing companies to offer complete financial services without needing to become a financial institution.

Through BaaS platforms, companies can integrate APIs to make a variety of financial services available directly to their customers. This includes from digital accounts e instant payments even bank transfers, generation of invoices, cell phone top-ups, and even personal loans.

Another important aspect is the security provided by BaaS platforms, which implement strict encryption and data protection standards to guarantee the integrity of users' financial transactions.

 

Embedded finance and BaaS: the phenomenon that turns any company into a bank

 

The possibility to offer a complete digital bank experience without the need to become a banking institution is connected to a phenomenon called Embedded Finance , a term that, in literal translation, means embedded finance or embedded finance.

This expression is used when financial services are “embedded” in areas that have no direct relationship with the financial world. Explaining in a simpler way, this is the phenomenon that turns companies into banks.

Using Embedded Finance, any business has the possibility of adding financial products and services to its portfolio, without leaving aside its core business. If you have ever used a store credit card, for example, this was most likely an experience related to embedded finance.

Three factors have definitely been essential in Embedded Finance:

• Evolution of regulation: new laws allowed the emergence of so-called fintechto emerge, which have allowed new players to operate in the industry by offering differentiated financial services;
• Technology advancement: the digitalization of financial services opened the way for new solutions and technology became more accessible;
• BaaS platform providers: by partnering with Banking as a Service (BaaS) platform providers like Dock, any company can offer services and financial products in a simple and agile way, counting on the support of those who dominate this expertise, both from the regulatory point of view and from the technological point of view.

Decoding the Banking as a Service model

 

We have already seen that embedded finance is the phenomenon that transforms companies into banks, and that technology, especially Banking as a Service, is one of the factors driving this revolution in the financial market. But after all, where did the Banking as a Service, or BasS?

“as a Service”, as the name suggests, refers to a model that converts product offerings into services. In other words, access replaces possession. Thus, in the corporate world, more and more items, solutions, parts of the business become “as a service”: SaaS (Software as a Service), IaaS (Infrastructure as a Service), Innovation as a Service, Fintech as a Service, and so on.

In our daily lives, we also see the same trend – solutions like Uber and Airbnb, which deliver driver services and residential rentals on demand, hired easily and quickly, and pay as you use, “as a service”.

And why not also offer companies the possibility of having their own bank as a service? This is the purpose of the model Banking as a Service (BaaS), the ideal solution for companies that wish to offer financial services to customers, employees, channels, etc., but without the obligation to operate as a banking institution.

Beyond BaaS, other similar models have emerged later on for the financial industry, such as Acquiring as a Service , Crypto as a Service e PAT as a Service.

 

Banking as a Service: Have you ever considered having your own bank?

 

Therefore, as we have already mentioned, with the help of BaaS, fintechs and organizations from different segments can offer the market a series of services that were previously the exclusive preserve of banks and financial institution, as a payment account, prepaid and credit card, withdrawal, deposit, transfer, bill payment, etc.

As the banking industry advances in a digital journey, Consumer demand for greater transparency, convenience and 24/7 availability is only increasing. They require greater control and autonomy and are more resistant to geographic limitations or opening hours.

So, if your company wants to offer financial services in the format that consumers would like to consume them, without having to bear all the investment and operational effort, the Banking as a Service (BaaS) is the best alternative.

 

Why is the Banking as a Service model so innovative?

 

BaaS not only enables any organization to include financial banking services in their business strategy without the need to become a bank, but also ensures that it becomes a reality in record time so that it meets expectations for a new consumer. By enabling a complete platform, ready to be integrated with any app through APIs, Banking as a Service ensures a quicker time-to-market while also offering a totally tailored customer.

Want to learn more? Click on the image below:

Without a platform like BaaS, developing and managing a digital bank would be a complex and expensive task, involving technology, commercial agreements, reconciliations, relationships with brands, licenses and regulations. BaaS simplifies this process, offering a turnkey solution that eliminates these barriers and allows companies in any industry to launch their financial services in just a few weeks.

In addition to offering a quick and efficient solution for launching financial services, the Banking as a Service also stands out for its ability to scale according to business needs.

This means that companies can start with a basic set of services and, as they grow and expand, easily add new functionality and capabilities to the BaaS platform, remaining competitive and adapted to the demands of an ever-evolving market.

 

How does a Banking as a Service API work?

 

Modules related to digital payment account and prepaid or credit cards are, together, the user interface with the real economy. I.e, the customer experience with BaaS happens mainly in the digital environment, through a custom proprietary application, in which he has control over his financial information and transactions. To carry out transactions in his account, the user has a physical or virtual card, whose design is also customizable.

Normally, the development of the application is the responsibility of the contracting company, which can carry out the project internally or outsource it. Integration with BaaS is done through APIs, which connect the front-end – application with your brand, your products and your “look & feel” – with the digital bank platform, which is 100% modular and dynamic .

 

Opportunities for Banking as a Service in Brazil and Latin America

 

Second study by Mordor intelligence, the size of the global market for Banking as a service Banking is estimated at US$5.32 billion in 2024 and is expected to reach $ 14.72 billion by 2029, growing at a CAGR of 26.60% during the forecast period (2024-2031).

The same survey points out that in Latin America the BaaS market is expected to reach US$ 2,14 billion in 2024 and reach $ 3,32 billion by 2029, growing at a CAGR of 7% between the aforementioned period (2024-2029).

As a matter of fact, analyzing the opportunities in the Latin American market offered by Banking as a Service, a variety of factors confirm a rather favorable scenario. In that sense, it is worth mentioning:

• Increase in the number of digital banking users: In January 2022, the share of Brazilians who used digital banking services was 77,3%, making Brazil the Latin American country with the highest penetration of digital banking services among the countries observed by the Statista study.
• Growing digital bank players: in Latin America and the Caribbean, the number of digital banks rose from 2017 to 2021 between 10 and 60, representing an average yearly growth rate of 57%, according to lifting Finnovista / IDB.
• Market expansion: are not just the neobanks “pure” people who are acting in this field. Other players, such as retailers and industries, are increasingly present, making this ecosystem increasingly multiple, as we will see later.

According to a study conducted by Deloitte, Brazilian industries—such as retail, consumer goods and more services contributing to over 35% of the GDP—will be able to expand their financial product and service offering and capture R$ 23 billion a year within five years.

 

Companies leveraging Banking as a Service

 

Although Banking as a Service is a reality across Latin America, in Brazil that the model is more advanced where some companies have gained the spotlight for incorporating a financial service and product offering to their business model. Learn about some success cases below.

 

 

Leader in cosmetics in Brazil banks over 1 million resellers

 

The cosmetics multinational of Brazilian origin and one of the leaders of direct sale in the world realized that its network of consultants faced a challenge of major proportions: the unbanking. To get an idea of ​​the scale of the problem, according to the company, around 40% of the sales force did not have access to a bank account.

In order to solve the issue, the company came up with the idea to create a proprietary fintech and relied on a partnership with Dock to provide technology in banking and payments through a complete Digital Banking platform.

The results are worth celebrating: In one year, 300 accounts were activated and more than 190 cards were issued.

See here how the company adopted BaaS to meet the demand for technology in their financial services and also consolidated a new successful line of business.

Leading supermarket chain in Brazil releases a digital account and consolidates their financial ecosystem

 

With an existing offer of credit card products, this supermarket chain felt it was time to expand the offer of financial services and products. For that, thepostor launching a digital account to consolidate its financial ecosystem.

The goal was to create a super app—that is, a multichannel hub bringing together a number of services in one platform, thus meeting user demand throughout their journey, from shopping to entertainment and all things related to their customers’ everyday lives.

The project was enabled through a partnership with Dock, which has a complete platform for Banking, Cards & Credit e Fraud Prevention. Through our open APIs, they were able to offer a complete digital account and a marketplace, which securely and quickly enables financial transactions, as well as card issuing and processing—all while also relying on a cutting-edge anti-fraud solutions ensuring protection all transactions.

Their consolidated financial ecosystem has improved their customer experience, which then started offering much more convenience in one platform. 23 thousand active accounts and more than 183 thousand cards issued confirm the success of the operation.

 

Can my company have Banking as a Service?

 

Yes. The answer is indeed as simple as it sounds!

There are no restrictions regarding industry, area of operation, size or any information to determine if you can contract the Banking as a Service API.

Because it is a platform totalmente flexible and modular, the capabilities Banking da Dock serves startups and fintechs to large corporations. In other words, any company that wants to offer a digital account!

Interested in transforming your financial offering with Banking as a Service Dock? Contact us to find out more details and start your journey towards financial innovation.

 

Why have your own bank?

 

There are several reasons why a company might include building their own bank in their strategy. We’ve listed some of the most important ones below:

• Expanding their portfolio by adding financial services to attract new customers;
• Having their own bank to pay their employees, suppliers and/or channels;
• Increasing their revenue by marketing financial products;
• Improving their customer relationship and increasing customer loyalty;
• Learning more about their target audience profile through information captured by BaaS.

Even banks can also benefit from the advantages offered by Banking as a Service – different from what one might think, they are not competitors, but partners. Fintechs and traditional banks can walk together. After all, the bank can use the disruptive technology of BaaS to change its model, becoming increasingly digital, gaining a lot of agility in implementation.

 

How to choose the ideal BaaS provider?

 

The Banking as a Service model enables any company to provide financial services in a quick and accessible manner, without the need to become a financial institution—all thanks to open-source APIs.

So finding the ideal BaaS provider is an essential step for companies looking to build their own digital bank.

Some factors to consider include:

• Quick implementation;
• Up-to-date functionalities promptly available;
• Add-on service offering;
• Scalable API and totally protected infrastructure;
• Regulatory support for implementation and ongoing operation;
• Quick adaptation to new rules issued by the Central Bank;
• Experience and consolidation in the industry.

An ideal provider of Banking as a Service not only offers fast and efficient implementation, but also provides ongoing support. This includes not only compliance with Central Bank rules and other regulations, but also the ability to quickly adapt to new guidelines as they arise.

Additionally, the BaaS provider's ability to offer complementary and adaptable services is critical. A robust platform must provide essential functionalities, such as payments, transfers and card issuance, but also allow customizations that meet the specific needs of the company and its customers.

The integration of APIs Pix, for example, has become indispensable due to its popularity and efficiency in the Brazilian market. The ability to offer instant and secure payments improves the end-user experience, but also increases companies' operational efficiency by reducing costs and simplifying financial transactions.

Therefore, companies must seek partners with solid and proven expertise in the market, thus guaranteeing a stable and safe operation. And the Dock is ready to help your company take advantage of the opportunities in the Banking as a Service! Talk to our team and find out more!

 

Revolutionize your business by relying on BaaS through Dock

 

Dock is a pioneer in Banking as a Service in Brazil and provides a complete banking solutionavailable. Through our platform, you can quickly and securely provide your users with a complete digital account experience, which includes:

• Bill payment;
• Instant payment;
• Transfers;
• Invoice generation;
• Recharges and vouchers;
• Personal loans;
• Remunerated accounts.

Apart from enabling the platform, Dock is also responsible for handling all treasury issues involved, which means we process and track transactions and authorize settlements. So you don’t need to worry about opening accounts for payments, processing transactions or regulatory compliance—it is all included in the solution.

To ensure the safety of operations, in addition to delivering the Digital onboarding of customers (with KYC, biometry etc), the management of payment accounts (debit and credit ledger) and API gateways with public and complete documentation, the Dock also has anti-fraudand in each transaction.

Furthermore, the platform banking also includes financial reconciliation tools, voucher and recharge marketplace and provides full regulatory and accounting support.

With this complete solution and already used by several customers, Dock has contributed to the advance of digital banks in Brazil and Latin America.

Learn more about our Banking solution and how we can help you revolutionize your business:

 

FAQ: ask your questions about Banking as a Service (BaaS)

 

What is banking?

The term "banking” covers operations carried out by banks, fintechs and companies that offer financial services to their customers, including current accounts, loans and payments. These services are essential for the economy, facilitating the circulation of values ​​and accelerating credit.

 

What is Banking as a Service?

Banking as a Service is a solution that allows companies to offer digital financial services, such as accounts and cards, without needing to become a bank. Through a complete technological and regulatory platform, companies can launch their own financial services quickly and without complications.

 

What is BaaS?

BaaS is the acronym for Banking as a Service, that is, another way of naming the platform that allows any company to provide financial services under its own brand, using the infrastructure and licenses of a provider such as Dock.

 

What is the “as a service” model?

The concept of “as a service” involves the transformation of products into services, replacing possession with access. Examples of this in the corporate world include SaaS (Software as a Service), PaaS (Platform as a Service) and IaaS (Infrastructure as a Service). This model is also evident in everyday services like Uber and Airbnb.

O Banking as a Service (BaaS) follows this trend, allowing companies to offer financial services without needing to become banks.

 

How to offer financial services with BaaS?

To offer financial services with BaaS, a company must start by choosing a provider with expertise in the financial market, such as Dock, which will facilitate the integration of your platforms through APIs.

 

Banking as a Service: Takeaways from this article

 

• Thanks to the advancement of technology and the digitalization of financial services, it is now possible for any company, from any segment, to offer banking services without necessarily becoming a bank.
• O Banking as a Service (BaaS) is the ideal solution for companies that want to offer financial services to customers, but without the obligation to operate like a banking institution.
• Analyzing the opportunities in the Latin American market offered by Banking as a Service, a variety of factors confirm a rather favorable scenario.
• Finding the ideal BaaS provider is one of the essential steps for companies that want to have their own digital bank.
• Dock is a pioneer in Banking as a Service in Brazil and has a complete banking solution available. Through our platform, you can quickly and securely provide your users with a complete digital account experience.

 

Related articles:

• Embedded Finance: The phenomenon turning companies into ‘banks’
• Web3: Understand what it is and the changes it can bring the financial industry
• Agritech: 5 opportunities for innovating in agribusiness by relying on financial solutions
• Financial inclusion in Latin America: The scenario and opportunities for fintechs