Banking-as-a-Service & Platform-as-a-Service- What They Mean and Why They Matter to You
2020 has been a rapidly evolving year for Fintechs and blockchain-related enterprises. We have gone into depth discussing fintechs in previous blogs- such as the role fintechs will play in a post-Covid-19 economy: https://www.apaylo.com/2020/06/30/the-extremely-important-role-fintechs-will-play-in-the-post-covid-economy/. We also discussed some interesting fintech and cryptocurrency facts: https://www.apaylo.com/2020/06/30/mind-blowing-fintech-and-cryptocurrency-facts-and-figures/
To quickly recap- especially for our newer readers- Fintech is defined as "a business that aims at providing financial services by making use of software and modern technology". Fintech is the union of technology and finance- which offers service providers the ability to offer streamlined financial products/services that were previously only available through heavily regulated traditional financial institutions (think Canada’s Big 5 banks). Some recent examples of Fintechs who are revolutionizing how individuals and businesses can borrow funds and process payments are PayPal, Lending Club, Square, and Prosper.
To go a bit deeper into the technology behind this, we also hear the term Banking-as-a-Service thrown around quite a bit in finance. What exactly is this? Banking-as-a-Service can be defined as an integral part of a financial services supply chain. It is an end-to-end process that ensures comprehensive completion of a financial service that is provided on the internet, within a specific time frame. This includes every process that is involved in completing a financial transaction from start to finish- and includes the management, deployment & delivery, and full regulatory and legal compliance- provided through a firm that is legally allowed to operate in the financial services industry. The process also heavily involves anti-fraud and security measures, such as data encryption.
To delve even further into the technological ecosystem in which this operates, we can also examine Platform-as-a-Service (or PaaS). PaaS provides an environment where services can be programmed and then fully executed. This can include third-party services which can be plugged into the platform. Also, this platform can provide API (Application Programming Interface- which we define in our blog here: https://www.apaylo.com/2020/08/18/why-your-website-should-have-a-payment-gateway-api-to-process-your-sales/), which are the interfaces that have the ability to execute services that are not hosted on the banking platform. An example of this is Salesforce- where comprehensive software development kits are provided to adapt software services; and to execute them within the Salesforce environment.
PaaS providers provide a programming environment because they must have the ability to properly communicate with the platform's interfaces; and also to insure complete availability, the platform operator needs to verify whether a service is available or not. In a properly defined software architecture, the PaaS can simply ping the services, and those who do not respond can easily and simply be switched off; or even made invisible.
In conclusion- we are seeing for ourselves the rapid escalation of Banking-as-a-Service and Platform-as-a-Service integrated within financial transactions in order to make the process run smoother and make all of our lives easier. In the years ahead, we can expect further developments within both spheres; and a proliferation of these services in our lives- in the financial transactions we execute and certainly in the business domain as well- from startups to billion-dollar multi national firms- to complete and execute transactions with ease and accuracy.
For more information: https://www.ventureskies.com/blog/banking-as-a-service-categorizing-the-services
To learn more about Apaylo's Payments-as-a-service platform: http://www.apaylo.com/plans