The New Banks

A new generation of banks is being formed. One that is based on blockchain technology. These new companies are forging ahead to take the role of banks to an even higher level.

Banking

The Banking-as-a-Service (BaaS) is a business model allowing for the construction of new financial products, integrated with numerous existing technological solutions and deployable in various jurisdictions.

This concept enables you to build a full-scale bank without having a banking licence, by using several APIs of different banks and fintech products of your choice. Would you like to collect an investment bank — please! A commercial bank? Be our guest! A retail bank? Nothing could be simpler. You just have to add some analytics to your set and you can start your business.

A bank built according to this model can be launched in a day and renewed every month — based on microservice architecture and using open-source software from the marketplace of banking technology.

How It Works

Banks do not trust each other or tech companies. They are afraid to lose their client base by entering a partnership with a stronger or more technologically advanced player. They are afraid that their products will not be competitive in a close comparison against alternatives. They are afraid that regulators will punish them for innovating upon basic products.

An ecosystem would require decentralization and the participants would have to interact on a “many-to-many” basis. Ensuring broad trust within such a system with traditional methods was unimaginable, which is why the BaaS concept was considered utopian for a long time.

Fortunately, technological progress has brought us a solution to the problem of trust — the appearance of blockchain (decentralized recordkeeping) and instant smart contracts has made it possible.

In this model, front-end customer service will be left to broad-profile banks, while financial products themselves will be offered by narrowly specialized fintech companies.

 The aim is to create a platform accessed by storefronts ensuring access to end users — banks, payment services, electronic commerce sites, exchanges, insurance companies working in various jurisdictions with different technologies (called Originators in the BaaS model) — on one side; and by fintech companies aiming to launch their new product or enter new markets on the other side. Thanks to the platform, they can do it quickly and efficiently, without needing to ensure compliance with the legislation of each new country and to develop integration with each new bank. As the platform already contains all necessary APIs, it can provide access to a new player more cheaply and quickly.