BaaS enables licenced banks to offer banking products and services to non-banking businesses though Application Programming Interfaces (APIs). This facilitates consumers and businesses to access embedded finance seamlessly.

Hope expanded on how embedded finance and BaaS are set to disrupt the banking industry: “Since the COVID-19 pandemic, embedded finance and consequently BaaS are on an exponential trajectory to disrupt the banking value chain, particularly in retail and SME. BaaS is the provision of complete banking processes from cloud-based API platforms that source banking products from a licenced bank or licence holder to deliver the financial service at the point of need - embedded finance.”

Hope outlined the three key participants in the BaaS value chain: the consumer of BaaS - which is the brand or fintech that embeds the product into their own platform, the BaaS provider - which connects the consumer of BaaS to the licence holder, and then the licence holders themselves. As examples, Hope cited mega-platforms such as Amazon, Shopify, and Uber as consumers of BaaS, Mbanq as a BaaS provider, and giants such as Goldman Sachs and Standard Chartered as the licence holders.

She added: “The market capitalisation of organisations involved in embedded finance is expected to reach $7 trillion by 2030. The US, as a dominant market, is expected to see $26 billion of revenue in the next three years.”

Rapid digital transformation seen post-pandemic has led to more sophisticated digital journeys. Hope highlighted the demand for BaaS as consumers desire simple, holistic experiences, and businesses want financial services embedded in their operations.

“Fintechs increasingly need a banking licence which is expensive and time consuming to procure, but with us they can set up shop within two months and employ Pay As You Go models instead of incurring a big cost upfront. For banks facing huge margin pressures, BaaS offers them the opportunity to gain new revenue streams and expand their balance sheet profitably, especially in markets where they do not dominate.”

Temenos does not act in the BaaS value chain, but they do enable it, facilitating connecting licence holders to provide regulated banking products to consumers. Hope concluded by stating that the Temenos architecture lends itself to BaaS and is designed to support multiple brands and ensure they reach their customers and provide efficient and hyper-personalised journeys to their end-customers.