Banking as a Service: Banks’ $25 Billion Revenue Opportunity in FinTech Banking

February 2022

Banking as a Service: Banks’ $25 Billion Revenue Opportunity in FinTech Banking

February 2022

Fintech partnerships are becoming a major form of innovation for financial institutions (FIs). According to a report from the Federal Reserve titled Community Bank Access to Innovation through Partnerships:

“Community banks are increasingly partnering with third-party financial technology companies (fintechs) to access innovation. Under the right circumstances and with the appropriate guardrails, partnerships with fintechs can provide community banks with this access, enabling them to better serve their customers and deploy innovations that may be too costly to develop independently.”

In our prequel report from Cornerstone Advisors titled The State of the Union in Bank-Fintech Partnerships, the team quantified the Fed’s comments. According to the report, nearly two-thirds of banks and credit unions partnered with at least one fintech in the past three years, and 35% made an investment in a fintech. Of those that haven’t partnered or invested, 37% plan to partner in 2022, and 18% expect to make an investment in a fintech in 2022.

These partnerships can take a few different forms. Banks can partner with FinTechs to improve their own internal systems, enhance their customers’ experience, or form Banking as a Service (BaaS) partnerships with FinTechs. 

Below, we dive deeper into the the current state of Banking as a Service and link to the full report that discusses the opportunity for banks to increase revenue and deposits through these FinTech partnerships. 

The growth of Banking as a Service

Both small and large banks have begun to recognize Banking as a Service as a significant growth opportunity for their institutions. Before discussing the growth trajectory of banking as a service let’s take a stab at defining it first. The report defines banking as a service as:

“A strategy where a financial institution partners with a FinTech or other non-financial institution to provide financial services to the partner’s customer base, leveraging the financial institution's charter and capabilities like account management, compliance, fraud management, and payment and/or lending services.”

Banking as a Service has received a lot of attention from the media in recent years, but there are still few banks that deploy the strategy. In a survey of financial institutions, only 11% of banks are pursuing a Banking as a service strategy and another 8% are in the process of developing a strategy.

banks approach to banking as a service chart

With so many banks still in the “consideration” phase of forming a Banking as a Service strategy, the industry is prone to see significant future growth. To learn more about Banking as a Service and how it presents a massive opportunity for banks and FinTechs alike, check out the full report using the link below. You can also speak to our team of experts to learn how you can launch a Banking as a Service program.

In this report you’ll learn:

  • What is the Banking as a Service revenue model for banks?
  • How can banks launch a Banking as a Service offering to FinTechs?

<div class="rt-btn-wrap"><a href="" class="button yellow w-button">Download full report</a></div>

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