Why More Companies Will Soon Offer Financial Services: The Future of Fintech and BaaS

Of course, this title is a figure of speech. A more nuanced label would state why most companies will offer financial services, but that would be a tad too long. In any case, if the past and current environments indicate the future, we should very soon notice more and more companies choosing to provide financial services to their customers, seemingly unrelated to their leading trade.

Another title could have stated: Every company will have the chance to provide financial services given the degree and speed of innovation in fintech. Dipping your toes into finance and offering financial assistance to your customers could be quite profitable.

Trust in banks is diminishing

We live in a young world. According to CNBC, citing the World Economic Forum, more than 50% of the world’s population is under 30, and they are reportedly cautious with banks. During WEF’s 2017 survey, 45.3% of respondents said they don’t trust banks to be fair and honest. Instead, only 28% declared that they trust their banks.

Most of the world expects technology to increase trust in financial services. Banks are notoriously slow and wary of change and innovation, so we must look towards younger companies and fintechs.

Still, one might wonder, ‘If fintechs are so cool and innovative, how come banks are still going strong right now?’. That is a fair point, and that’s because, and we’re speaking of big banks now, financial institutions often pack 100+ years’ worth of experience and have a solid physical presence. Also, although banks invest big bucks in innovation and technology, it appears that 75% of their IT budgets go to maintaining their current systems.

There’s hope for the future

It used to take up to 15 years for a software company to emerge on the market. Now, with what we call “Infrastructure-as-a-Service”, you can start a company with a credit card and a laptop.

According to Forbes, through Amazon Web Services, startups can access free tools, resources, and even thousands of dollars worth of credit.

Banking-as-a-Service (BaaS)

Why should I offer certain financial services and not become a bank altogether? Becoming a bank could be a great idea if you have the money and lots of time on your hands that you wish to waste on waiting for a banking licence. And applying for a grant is just the first step, followed by many others.

Instead, companies’ needs gave rise to Banking-as-a-Service, or BaaS, which, according to Nigel Verdon, Railsbank’s CEO, ‘has all the components you need to build any financial product - issuing a bank account, sending/receiving money, issuing accounts, controlling cards, issuing credit, issuing insurance’. By tapping into BaaS, you can build a neo-bank or become a lender. ‘BaaS is key in allowing any business to build financial services products or any business to become a fintech’, says Nigel.

Learn from the great

Let’s take a look at Apple. Beyond providing Apple Pay, the tech giant started offering Tap to Pay technology just this year. This feature lets iOS users finally use their phones as portable POS systems for their businesses.

To sum up, a company that started with innovation and development in the technology sector chose to provide financial services to their loyal customers, which, in turn, will raise its customer base. If a company with a lot of revenue has already decided to enable payments on the phone they are making, what’s stopping you from giving financial services a chance?