Banking-as-a-Service Market Size - By Component (Platform, Services), Type (API-based Banking-as-a-Service, Cloud-based Banking-as-a-Service), Enterprise Size (Large Enterprises, Small & Medium Enterprises), End Use (Banks, NBFC, Others) & Forecast, 2024 - 2032

Banking-as-a-Service Market Size - By Component (Platform, Services), Type (API-based Banking-as-a-Service, Cloud-based Banking-as-a-Service), Enterprise Size (Large Enterprises, Small & Medium Enterprises), End Use (Banks, NBFC, Others) & Forecast, 2024 - 2032

Banking-as-a-Service Market Size

Banking-as-a-Service Market size was valued at USD 15.9 billion in 2023 and is estimated to register a CAGR of over 17% between 2024 and 2032. The emerging fintech industry is significantly fueling the market growth by fostering innovations & competition. Financial technology companies are creating agile & customer-centric financial solutions that traditional banks are seeking to incorporate through BaaS partnerships.

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According to the India Brand Equity Foundation, the Indian fintech sector is slated to be worth USD 150 billion by 2025. India has the third largest FinTech ecosystem globally. It is also one of the fastest-growing markets in the world. There are currently over 2,000 DPIIT-recognized Financial Technology (FinTech) businesses in India, and this number is rapidly increasing.
 

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The growth of digital banking services is driving the banking-as-a-service (BaaS) market growth. The rising popularity of digital banking has prompted traditional banks to partner with BaaS providers to stay competitive in the digital landscape. BaaS enables these banks to quickly integrate advanced digital features & services into their offerings, thereby enhancing customer experiences as well as meeting the increasing demand for online & mobile banking solutions.

For instance, in October 2023, PoetrYY Finance entered the financial landscape with a mission to revolutionize banking services for underserved groups, startups, small businesses, and individuals. Through a strategic partnership with Mbanq's advanced banking-as-a-service (BaaS) platforms, PoetrYY aims to provide innovative, secure, and inclusive financial solutions.

Data security and privacy concerns are significant challenges in the banking-as-a-service market. With the sharing of sensitive financial information among traditional banks, third-party providers, and consumers, it is important to ensure robust security measures and regulatory compliances. Breaches or unauthorized access can lead to financial frauds, identity thefts, and the loss of trust. BaaS providers must invest heavily in cybersecurity infrastructure and adhere to the stringent data protection regulations to mitigate these risks as a single security lapse can lead to severe consequences, impacting not only the affected parties but also the entire BaaS ecosystem.

COVID-19 Impact

The COVID-19 pandemic accelerated the adoption of digital banking and banking-as-a-service (BaaS) solutions. Lockdowns and social distancing measures compelled traditional banks to swiftly embrace digital platforms to serve their customers remotely. BaaS providers offered the infrastructure and expertise required, thereby facilitating this transition. The COVID-19 pandemic highlighted the importance of resilient and flexible banking systems, spurring more financial institutions to turn to BaaS solutions to enhance their digital capabilities and adapt to the changing customer needs.

Banking-as-a-Service Market Trends

Cloud computing is an emerging trend in the banking-as-a-service (BaaS) industry due to its cost efficiency, scalability, and flexibility. By migrating critical banking operations to the cloud, BaaS providers and traditional banks can reduce infrastructure costs, streamline operations, and improve accessibility. Cloud services also enable real-time data processing, facilitating faster and more efficient financial transactions. This trend is reshaping the industry as banks are increasingly leveraging the cloud to enhance their BaaS capabilities; this is enabling them to adapt to the changing market dynamics as well as offer innovative & on-demand financial solutions.

Open banking is a prominent trend in the BaaS market as it promotes collaborations and competition. It enables traditional banks to share customer data securely with third-party financial service providers via APIs, thereby fostering innovations. For instance, in October 2023, Apple launched Connected Cards in the UK, utilizing the Open Banking API. This feature in the iOS 17.1 developer beta allows users to view account balances and the transaction history for supported banks, enhancing the Wallet app's functionality.

This trend is empowering consumers with more diverse & personalized financial solutions, encouraging BaaS providers to offer services that align with the open banking principles. The growth of regulatory support for open banking is driving the adoption of BaaS solutions, transforming the banking landscape to be more customer-centric, interconnected, and innovative.

Banking-as-a-Service Market Analysis

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Based on component, the platform segment held over 70% of the market share in 2023, as financial institutions are increasingly relying on the technology platforms of BaaS providers. These platforms offer a comprehensive suite of services including data access, processing, and security. They enable banks to rapidly expand their digital offerings and tap into the emerging markets. With the demand for agile & scalable solutions, the platform segment is slated to grow as BaaS becomes the foundation for banks to enhance their digital presence, streamline operations, and meet the evolving customer expectations.

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Based on type, the cloud-based banking-as-a-service market recorded 72% of the revenue share in 2023, owing to the fact that financial institutions are seeking scalable, cost-effective, and flexible solutions. Cloud-based BaaS offers on-demand access to banking infrastructure, enabling banks to streamline operations and deploy innovative services rapidly. Cloud-based BaaS solutions can effectively meet the rising demand for digital banking, real-time transactions, and remote access.

Banks are embracing cloud technology to enhance their digital transformation efforts, allowing financial institutions to stay competitive and deliver customer-centric & technology-driven solutions. For instance, in February 2023, Oracle, a cloud technology company based in the U.S., launched Oracle Banking Cloud Services, a collection of modular & cloud-native services designed to provide a flexible & component-based approach to banking technology solutions.

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North America banking-as-a-service market accounted for 32% of the revenue share in 2023. The region's financial industry, coupled with a strong focus on fintech innovations, is driving product adoption. Regulatory support and a tech-savvy consumer base are fostering the development of BaaS partnerships & services. Additionally, the increasing need for digital banking solutions and the presence of key BaaS providers in the region are propelling market growth.

As North American banks continue to embrace BaaS to enhance their offerings and remain competitive, the market will expand substantially. For instance, in September 2023, the U.S. Bank introduced banking & payment services that have been tailored for smaller medical practices, thereby aiming to provide them with the same financial support and resources enjoyed by larger healthcare providers.

Banking-as-a-Service Market Share

Green Dot and Solarisbank AG are the major players in the banking-as-a-service (BaaS) industry due to their expertise and comprehensive BaaS offerings. Green Dot, a leading fintech company, provides a wide range of banking services and financial products to various businesses, thereby enhancing their capabilities to offer digital banking solutions. Solarisbank, a company based in Germany, offers a BaaS platform for businesses to integrate banking functions into their services.

Banking-as-a-Service Market Companies

The major companies operating in the banking-as-a-service (BaaS) industry are

• Green Dot
• Solarisbank AG
• ClearBank Ltd.
• Plaid
• Galileo Financial Technologies
• Marqeta
• Railsbank
• Square, Inc.
• Banco Bilbao Vizcaya Argentaria
• MatchMove Pay Pte Ltd

Banking-as-a-Service Industry News

• In October 2023, Hitachi Payment Services, a company based in India, launched the HPX program to establish long-term partnerships with fintech startups. The program aims to transform the payments industry by supporting innovative solutions that enhance the payment experiences for businesses and consumers, thereby emphasizing enduring collaborations.

The banking-as-a-service (BaaS) market research report includes in-depth coverage of the industry, with estimates & forecast in terms of revenue (USD billion) from 2018 to 2032, for the following segments

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Market, By Component

• Platform
• Services

Market, By Type

• API-based Banking-as-a-Service (BaaS)
• Cloud-based Banking-as-a-Service (BaaS)

Market, By Enterprise Size

• Large enterprises
• Small & medium enterprises

Market, By End Use

• Banks
• NBFC
• Others

The above information has been provided for the following regions and countries

• North America
  • U.S.
  • Canada
• Europe
  • UK
  • Germany
  • France
  • Italy
  • Spain
  • Russia
  • Nordics
• Asia Pacific
  • China
  • India
  • Japan
  • South Korea
  • ANZ
  • Southeast Asia 
• Latin America
  • Brazil
  • Mexico
  • Argentina 
• MEA
  • Saudi Arabia
  • UAE
  • South Africa

Frequently Asked Questions (FAQ)

What is the size of banking-as-a-service market?

The market size of banking-as-a-service reached USD 15.9 billion in 2023 and is set to witness 17% CAGR from 2024 to 2032, backed by the emerging fintech sector.

Why is cloud-based segment gaining traction in banking-as-a-service industry?

The cloud-based banking-as-a-service (BaaS) segment accounted for a market share of over 72% in 2023, as financial institutions are seeking scalable, cost-effective, and flexible solutions.

How big is North America banking-as-a-service market?

North America market held over 32% revenue share in 2023, owing to the region's financial industry, coupled with a strong focus on fintech innovations.

Who are the key players in banking-as-a-service industry?

Green Dot, Solarisbank AG, ClearBank Ltd., Plaid, Galileo Financial Technologies, Marqeta, Railsbank, Square, Inc., Banco Bilbao Vizcaya Argentaria, and MatchMove Pay Pte Ltd.