At your service

Nigel Verdon, serial fintech founder, most recently of Railsbank, describes himself as a banking-as-a-service evangelist. Here, he sets out why he believes it fulfils the promise of democratised finance

The last few years have been eventful for the financial services industry. Whether it’s Brexit, the plethora of new regulations, or the profound impact of COVID-19 on both finance and financial behaviour, there’s been a proliferation of developments keeping us busy.

Amidst this unprecedented level of change, there’s another major shift that’s gaining momentum and changing the industry for the better. The concept of banking-as-a-service (BaaS).

The BaaS model is changing the game. Innovative BaaS platforms enable fintechs, developers and brands to prototype, launch and scale financial services capabilities without developing the underlying infrastructure themselves.

This allows ambitious businesses, ranging from seed producers to supermarkets, to provide their customers with banking services without first having to apply for a banking licence. They can connect with core financial products through APIs, ideal for building the digitally-native business models and digital economy that the pandemic has accelerated.

At its heart, BaaS abstracts the complexity of banking products and processes, making them easily accessible and consumable to third-party enterprises, regardless of whether their core business is financial services. It’s widening access to financial services by providing a simple way for businesses to interface with banking and APIs but none was successful ‘outside the tent’, due to the APIs only being aligned to corporate banking silos as opposed to what customers and developers actually wanted to consume.

Then, in 2016, Railsbank launched the world’s first complete BaaS platform. We’ve recently announced the launch of our Houston no-code platform and OpenRailz API, which make embedding finance into apps and customer journeys as simple as point-and-click. We hit this milestone by spending the last four years deconstructing all financial products into core digital components, enabling us to do for financial services what Apple’s iTunes did for the music industry. And BaaS is continuing to evolve. Today, there are more than 50 companies, globally, focussed on pureplay BaaS, which are incorporating more specialised services and catering for specific verticals, such as crypto companies, which have their own unique banking and payments challenges. BaaS has opened up banking to industries and sectors that have traditionally been under-served by legacy banks with their decreasing risk appetites.

The impact that BaaS is having, and will have over the coming decades, cannot be stressed too highly. It hasn’t only changed the game, it’s changed the playing field, changed the economics, changed the teams, and changed the rules.

payments infrastructure, and then embed financial services within their products and services. Make no mistake, this is the true democratisation of financial services that people have been searching for.

Traditional financial services infrastructure that supports banks, insurance companies, and so on, can’t move at the same agile pace that modern digital enterprises demand, nor does it have the real-time governance technology needed to keep up with modern financial crime. BaaS providers combine the best of both, ensure innovation, and enable faster time-to-market. Today, we’re seeing high-end retail and e-commerce businesses successfully launching cards and lending. BaaS is BaaS is one of the hottest things in London right now, and it’s not happening by the result of a fintech accident. Nor is it a fashion ideology that’s or fad that will fizzle out. It’s the direct result of a fintech ideology that’s caused a caused a revolution revolution, the impact of which has been felt across the whole global financial services sector. The overall market size of embedded finance, powered by BaaS, is expected to more than double, to more than $7trillion, by 2030.

It has its origins in 2011, when London-based fintech Currencycloud became the first to give developers a complete set of bank-grade payments and foreign exchange APIs. Prior to this, there were various attempts by banks to launch