Banking-as-a-Service in 4 BaaSics revolutionising the payment sector

I revolutionise the payment sector by allowing non-banking or non-financial companies to integrate banking or payment services via APIs, without managing technical and regulatory complexity. Who am I?
Xpollens answers the question by presenting 4 BaaSics that drive it daily.

Before defining Banking-as-a-Service, let’s go back to the roots with a bit of history…

Since the early 2000s, the rise of digital and cloud technologies has exponentially increased the number of “as-a-service” solutions. Both businesses and consumers have shifted towards dematerialized, on-demand service offerings based on usage or subscription fees, moving away from long-term investment models.

The story began with SaaS, or Software-as-a-Service. With this technology, users no longer need to purchase software on disks (or other physical media), have a reader to install them, or buy updates separately. An internet connection suffices to access the software, use it as needed, and receive automatic updates.

A major public example that revolutionized the music and film industry is the “as-a-service” model, leading to the birth of streaming platforms for music and video on demand.

In businesses, Infrastructure-as-a-Service solutions replaced physical servers, which required complex installations and significant investments. IT services transitioned from a rigid model to an on-demand model, allowing flexible scaling of IT infrastructures with pay-as-you-go pricing.

More flexible, cost-effective, and aligned with real needs, the “Anything-as-a-Service” model has become a new consumption mode, including in the financial and banking sectors.

Now that the “as-a-Service” model is no longer a secret, it’s time to see its application in the financial and banking sectors.

BaaS allows non-banking companies to integrate customized banking functionalities into their offerings or financial tools without dealing with the banking and technical complexities. Based on APIs – Application Programming Interfaces that allow different applications to communicate and interact – this model facilitates the integration of financial services into various applications, promoting innovation.

Like banks, Banking-as-a-Service providers rely on a core banking system. These central systems and software manage basic operations, such as customer account management, transaction processing, loans, or deposits. Unlike banks, which handle all these operations, Banking-as-a-Service providers may offer only some services, according to their license.

Primarily favored by Fintechs, the BaaS technology relies on a platform optimized for APIs. At Xpollens, it is a proprietary cloud-hosted platform structured in microservice functional blocks. API integration provides clients with a suite of banking or payment services to:

• Open and manage accounts for individuals or businesses.
• Generate IBANs or virtual IBANs.
• Automate payment flows.
• Collect and disburse funds.
• Issue virtual or physical cards.

Regardless of their industry, any innovative company can choose a payment service provider and its BaaS platform to accelerate digital transformation and revenue growth.

BaaS plays a crucial role in modernizing and digitizing financial services, akin to two other interconnected concepts that must be distinguished.

Open banking is a regulatory initiative requiring banks to open access to customer financial data (with their consent) to third parties via secure APIs. This openness allows fintechs and other companies to develop personalized financial services, fostering competition and innovation.

The Bank-as-a-Platform (BaaP) model refers to a bank opening its technological infrastructure and financial services to partner companies via APIs. They can thus create and offer financial products and services based on the bank’s platform.

Defined as such, Banking-as-a-Service must apply a high level of reliability, scalability, and project support, aiming for an easy and perfectly secure user experience. This is why Xpollens’ BaaS is based on three pillars.

The client company’s interface connects via API to the BaaS platform of the payment service provider, allowing it to offer account management and payment services under its own brand through its applications and websites.

The company relies on the payment service provider’s license, avoiding the need to obtain its own. Xpollens is licensed as an Electronic Money Institution by the ACPR.

BaaS experts ensure that compliance, legal, and technical aspects are well managed.

Today, all industries have opportunities for transformation and value creation based on payment technologies. Choosing Banking-as-a-Service and embedded payments means using intelligent and accessible solutions to optimize purchase paths, retain customers, pay third parties, simplify the money collection and disbursement process, or launch new business models. The opportunities are endless across various sectors.

An insurer can instantly compensate policyholders, preventing them from having to advance repair costs for a claim by using a virtual card.

Retailers or e-commerce merchants can launch loyalty programs enriched by payment data with an enhanced customer experience.

A travel company can quickly launch an innovative card program and pay its suppliers instantly and securely with virtual cards.

An online gambling or betting specialist can instantly and automatically transfer winnings to players’ bank accounts via instant transfer.

In the B2B ecosystem, signing a direct debit mandate allows garages to place regular orders on an e-commerce site for auto parts without needing strong authentication for each transaction, and without being limited by card ceilings.

All sectors can benefit from the potential of Banking-as-a-Service to transform payment methods, delight users, and create value.