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Digging into the BaaS Basics – what is it and why should I care?

Banking as a Service blog

We’ve been hearing a lot of Banking as a Service (BaaS) recently, and if your bank is looking into new growth strategies this year, you may want to consider this alternate form of banking. BaaS offers banks a faster path to growth with more cost-savings than traditional strategies like mergers and new product development do. Larger financial institutions and neobanks have already hopped on board, leading the BaaS movement, but that doesn’t mean you’ve missed the boat. In fact, you’re right on time because only 11 percent of banks are currently pursuing BaaS. Let’s explore BaaS further and discuss how your bank can get started.

A Quick Refresher on BaaS

At its most basic level, Banking as a Service is when licensed banks allow non-banks to integrate digital banking and payment to their own products. It’s when businesses such as auto dealerships, car sharing services, medical practices, vet hospitals (to name a few) partner with a bank to offer services like loans, payment plans, or debit/credit card solutions.


There are a multitude of advantages to consider BaaS for your bank. Here are a few of the major ones: 

  • BaaS drives innovation with adoption of new technology capabilities without the expense of product development and burden on internal IT resources. 
  • It increases market share and broadens the customer base at a lower cost. Customer acquisition costs from $100 to $200 can be lowered between $5 to $35.
  • It attracts and retains your bank’s customers by meeting their demands to have faster, more convenient banking options. Imagine if a customer had to wait to visit a bank to finance laser eye surgery?
  • It provides more sources of revenue for banks by charging a fee for each API transaction. See a list of consumer revenue sources the estimated per unit revenue on page 13 of Cornerstone Advisors: Banking as a Service 2021 report.

How to Get Started with BaaS

If you're a small to mid-size bank, you may have mixed emotions about BaaS because the information available online can be quite vague and open to interpretation. An investment of this caliber has to be easy to implement and proven to be successful.

Well, we’re here to tell you that BaaS is easy to onboard (depending on your current system setup) and can definitely increase your bottom-line, but only if you follow our recommendations below.

  • First, identify how BaaS can benefit your business. 
    You’ve read about BaaS benefits on banks and how you can use it, but does it make sense for your bank to onboard? Your team should have a discussion internally and look for opportunities where BaaS could help expand your product portfolio. Have customers been asking for products or services that require API integration that only BaaS could fulfill? Is your bank limited in IT resources and would need help from a vendor to bring on BaaS?
  • Ask your core provider. 
    In adding any product or service to your bank, you should first talk to your core provider about the possibilities. They may offer BaaS directly and/or work with third-party partners that can deliver the products or services on your wish list. Just make sure to ask what onboarding looks like, the initial cost, and the costs to operate moving forward. 
  • Explore BaaS platform providers.
    You may choose to explore a different provider if your core provider doesn’t offer BaaS or if they do, the cost to onboard is exponential. If you decide to look for another provider, make sure they listen to your needs, are affordable, and have a reasonable delivery timeline. Ask for references, so that you can hear first-hand from other banks about their experience with BaaS. Additionally, ensure you take a new provider through a thorough due diligence process. Your bank is ultimately responsible for the security of your products and services, but with an effective due diligence process, you can help manage risk and avoid compliance trouble.

Learn More About BaaS for Your Bank

The time has come to get educated on BaaS for your bank. If you’re interested in learning more about how it works and the possibilities for your bank, we have a couple of different options that will help.

  1. Do your research online.
    Here are the resources we used for this blog and are happy to share them: McKinsey & Company, Forbes, and Cornerstone Advisors. Have a great resource to add? Email us at

  2. Visit our blog. 
    There is tons of information out there and sometimes you don’t know what to believe or what to read first. Take a look at our blog for hot topics in community banking and learn the honest truth behind the most popular terms and trends.

  3. Talk to us about your needs. 
    As a modern core processing and digital banking partner, IBT Apps equips community banks with the technology that enables them to serve their communities and stay competitive in today’s landscape. If you’re wanting transparency on BaaS and interested in exploring the options for your bank, let’s have a discussion.

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