Banking as a Service APIs have grown in popularity as a way for banks and lenders to expand their reach and provide more flexibility and convenience for their customers. However, despite this popularity, there are still many in the industry that aren’t yet aware of exactly what they are, how they work, or what they bring to the table in regard to value for both the consumer and the financial institution.
There are a number of new functions that banking as a service (BaaS) can open up for a traditional financial institution, and many benefits that come with leveraging a third party for these functions.
To help lenders understand everything they need to know about BaaS, we are going to cover:
- What banking as a service APIs are
- The benefits of API banking for lenders and banks
- How to get started
Let’s dive into each and equip business leaders with the knowledge they need to leverage the best innovations in fintech.
What are Banking as a Service APIs?
BaaS is a term that refers to banks allowing access to their banking services through a third-party app. This is done through an application programming interface (API), which essentially allows the backend or API of the third-party app to connect with the backend of a bank’s lending products.
This allows a fintech to create convenient and user-friendly apps, webpages, and embedded finance tools on merchant sites that offer the bank or lender financing. This all can happen without the bank having to develop any apps themselves or even update their own website. Instead, financial institutions can focus on what they do best and let fintechs focus on getting their products in front of as many consumers as possible in a convenient package.
Benefits of API Banking for Lenders and Banks
There are a number of significant benefits that financial institutions can take advantage of by setting up a BaaS API integration. Although some are more important than others, we have selected the following as the most important. They are:
- Larger consumer base
- Higher conversion rate
- Direct access to shoppers through embedded financing
- No app development costs
These benefits are the most valuable because they have a direct effect on the profitability of a lender. By increasing the number of consumers that can access financial products and the rate at which they convert, BaaS tools can significantly impact revenue. By allowing banks to forego developing their own apps in favor of working with a third party, they can also lower costs substantially.
As a result, baking as a service APIs tip the scales from both sides in regard to profit, boosting profitability and bringing banks into the modern age of finance. The direct access to shoppers by embedding finance applications at the point of sale is arguably the biggest game-changer on the list, with 50% of consumers having used POS financing in the past year. Capitalizing on consumers that are already shopping allows for much higher conversion rates as well.
So, how can banks get started? The fastest and easiest way is to partner with a fintech with omnichannel functionality, rapid deployment, comprehensive analytics, and the ability to offer every type of financing that a bank would like to offer. Luckily, Skeps does all of this and more.
Leverage Banking as a Service APIs With Skeps
Skeps offers a comprehensive, end-to-end consumer financing platform that helps businesses modernize their entire payment process. Working with an entire network of established lenders, we go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:
- Installment financing payment plans
- Co-branded credit cards
- Consumer loans and leases
If you’re looking to partner with a forward-thinking fintech company that will keep consumers' eyes on the purchase while offering best-in-class financing, Skeps is the perfect fit.