Banking as a Service, or commonly referred to as “BaaS,” is an ever-expanding sector of the financial world. You may be wondering what exactly BaaS is. Banking as a Service has essentially enabled the modernization of banking. Through the latest technological advancements, BaaS solutions enable third-party financial organizations to provide consumer or business transactions, banking, and other financial services with the help of partner banks. Similar to the way that websites are hosted on the internet, financial services offered by fintechs are hosted by banks like Evolve. We maintain and secure financial data to ensure tech startups or industry titans are sending and receiving your money in a way that is compliant with federal regulation.   

BaaS Basics 

As a financial “host” our role is to provide the technology and banking industry knowledge to allow companies, like fintechs, to add financial services to their product offerings and focus on a seamless user experience. Each company has unique expertise and industry knowledge – but banking can be complex due to its high levels of regulation. Evolve’s role is to stay apprised of the regulatory environment and ensure industry standards for Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) are met. Evolve offers products such as card issuing, accounts, ACH, and more. Fintechs select and combine solutions to fit their company’s goals.  

BaaS Ecosystem 

You may not have noticed it, but technology powered by BaaS is all around you. Do you use a budgeting app – one that connects to your accounts or has financial tools? This is likely powered by BaaS.  Have you ever bought something online using a Buy Now Pay Later feature? This feature is powered by BaaS. How about paying for your rideshare to the airport? Powered by BaaS. You probably never noticed that you’ve been a part of the BaaS ecosystem for years, but here you are – you’re what in industry terms is known as the “end user.” Thousands of decisions go into making your experience the best it can be.  

BaaS Essentials 

While you may now better understand that Banking as a Service is part of your everyday life, it might be helpful to review some important topics, themes, and verbiage. This information can help you feel better informed and make decisions with confidence. Cut through the insider-jargon with this lexicon of BaaS terminology.  

End users 

End user is the term used in BaaS to reference the consumer. This is the person we have in mind when banks and fintech and investors are discussing how a product will solve a problem or innovate on the existing way of banking.  

Fintechs 

Fintech is the shorthand term for Financial Technology companies. The first example that comes to mind for most is the peer-to-peer apps that allow you to send money on your phone instantly. Fintechs are companies, sometimes startups, that want to improve the end user experience of banking and solve specific problems, so they use technology to do so.  

Partner Bank 

Partner Banks, such as Evolve, provide the backend banking products and regulatory expertise to Fintechs. For instance, let’s say a fintech company wanted to begin issuing a debit card with a corresponding account. The fintech would partner with a bank that specializes in Banking as a Service to provide that card. As a Partner Bank, Evolve has existing direct membership relationships with all the major card carriers, and we provide our partners with guidance throughout the process to ensure they adhere to the carrier requirements. This is just one example of how Evolve acts as a partner bank, to view our full solutions suite, click here.  

A note on FDIC Insurance 

FDIC insurance is a key consumer protection to safeguard consumer funds against a bank failure up to $250,000. It is important to highlight that within the partner bank-fintech relationship, funds are protected at FDIC-insured institutions in the event of a bank failure. Individual fintech company insolvency is not under the jurisdiction of the FDIC.  

Evolve Bank & Trust is member FDIC.  

Open Banking 

Evolve Open Banking is the division of Evolve that caters to our BaaS partners. Banking as a Service is just one element of Open Banking. Open Banking also includes Embedded Finance; learn more about embedded finance here. Essentially, you can think of Open Banking as the umbrella term for the connectivity between partner banks and fintechs.  

While this may be a lot of information to absorb, remember this key takeaway: Banking as a Service is an industry focused on the end user experience. Giving the user more options, a quicker start time for opening an account, a sleeker online banking portal – fintechs are here to address those concerns and more. Now that you know more about the BaaS ecosystem, you’ll see these players and their products all around you. Evolve Open Banking is here to provide secure banking solutions to allow fintechs to continue innovating and connecting with you as end users.