Until very recently, there was only a single general definition of what actually defines banking in terms of how it presents itself to the customers. People and companies dealt with physical banks through face-to-face interactions in bricks-and-mortar branches. Now, with the rapid growth of a new model of banking that is based on digital banking as a platform that interfaces through computers and mobile devices, there is a split, which can be phrased as comparing banking as a platform vs banking as a service.

 

Platform banking can be described in terms of the relationship between the bank and the customer, where the bank ‘owns’ the customer and provides all the required services. In the banking as a service (otherwise known as BaaS) model, the customer is owned by a non-banking financial services provider which integrates its services with facilities from one or more banks.

 

Banking as a platform

The platform model is based on connection rather than control. Outside of banking, familiar companies like Airbnb and Uber use this to run scalable, cost-effective operations that connect consumers directly to the services they want.

 

There is now a driving force which will make every bank, at least to some extent, require a platform model. Starting in 2018, the PSD2 regulations in Europe force banks to open their systems via interfaces for account information, services and transactions. Banks are becoming banking platforms by way of regulation, to which third-party companies have access.

 

In banking as a platform, the bank is seeking to provide services and experiences to its customers through a digital interface over the internet. By either designing and building suitable applications, or engaging third-party software and services technology firms, the bank will provide applications, servers, storage and networking to open its services via the internet.

 

With digital banking as a platform, banks focus on their core functions, which are to deliver products, services and experiences while leveraging their infrastructure, platform and scale. The goal is to gain a foothold in the digital banking sector while reducing development time and cost, and to provide most products and services across a single portal for the customer.

 

Probably the most advanced platform for the banks is the payments platform, which created a change in the way payments are made. It has been responsible for making payments cheap, real-time, fast, and simple enough to complete on a mobile device. Numerous examples of payments platforms abound, with the most prominent being PayPal, Square, and Apple Pay.

Below is a list of best online banking platform providers currently offering products to both banking as a service and platform banking customers:

Banking as a Service - list of 172 BaaS companies

Banking as a Service

Built on the concept of software as a service (SaaS), which enables users to subscribe to function-specific services over the internet rather than having to buy and install applications on their computers, BaaS is the plug-and-play banking equivalent that enables users to access financial services over the internet. It typically does this through banks offering up their infrastructure to third-party service providers such as financial-technology firms (fintechs), that are offering retail banking services, typically through the use of application programming interfaces (APIs).

 

Fintechs provide various banking offerings to their customers by building their services on top of the existing regulated infrastructure of licensed banks. This enables service providers to embed a wide range of financial services into their package of offerings for their customers. The customers are not themselves account holders in the supporting bank. This is pay-for-service banking that is perhaps the most essential aspect of BaaS. Fintech companies can simply pick from a range of financial products and then tailor them to the needs of their customers; in doing so, they can create new financial platforms of their own.

 

The list of best online banking platform providers includes new players such as Mambu, 10X, Thought Machine, and FinXact, as well as products from the traditional core platform vendors. These promise to help banks radically modernize and accelerate the benefits through higher developer productivity and removal of technical hurdles. They can achieve further efficiencies by leveraging cloud-based services, which enable them to deploy new products and scale infrastructure quickly, and use development tools that support automation.

 

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