What Is Banking as a Service?

More and more everyday apps now offer financial features. A ride-hailing app lets drivers access advances, an online shop offers pay-later options, and a SACCO app lets members save and borrow from their phones. Much of this is made possible by an approach known as Banking as a Service, or BaaS.

This article explains what BaaS is, how it generally works and what a business should think about before adopting it.

Banking as a Service in simple terms

Banking as a Service is a model in which a provider makes financial services available to other businesses, usually through APIs (application programming interfaces). Instead of building every capability from scratch, a business can plug these services into its own app, website or platform and offer them to its customers under its own experience.

The idea is often described as embedded finance: financial services appear inside the products people already use, rather than only at a bank branch or banking app.

What BaaS can include

The services available vary by provider, but commonly include:

• Payments and collections, including integration with mobile money such as M-Pesa.
• Customer onboarding and verification (KYC).
• Lending and credit infrastructure, such as credit assessment and loan management.
• Accounts, wallets or savings features, where supported by the provider's arrangements.
• Credit checks, statement analysis and reporting tools.

How it generally works

1. A business identifies the financial features it wants to offer its customers.
2. It agrees on the scope of services and responsibilities with a BaaS provider.
3. Developers integrate the provider's APIs into the business's platform, usually testing first in a sandbox environment.
4. The features go live, and the provider handles the underlying financial infrastructure while the business manages its customer experience.

Benefits and responsibilities

BaaS can help businesses launch financial features faster, reduce the cost of building infrastructure in-house, and create new ways to serve customers. It can also help extend access to financial services to people who are already using a trusted platform.

At the same time, financial services are regulated. Businesses should understand which regulatory obligations apply to their model, how customer data will be handled under the Data Protection Act, 2019, and how responsibilities such as customer support, security and dispute handling are shared with the provider.

Talking to WeLend

If you are exploring how to add financial services to your platform, you can reach WeLend on WhatsApp to understand our Banking as a Service offering, how integration works and what would be required for your use case. We can talk through the specifics so you can decide whether it is the right fit.

This article is general information, not financial advice. Product details, requirements and terms are confirmed directly by WeLend.