All About That BaaS: The Rise of Banking as a Service


April 7, 2022



‘Banking as a Service’ (or BaaS for short) is a model that allows banks to integrate their digital banking services into non-bank businesses, empowering fintechs and other non-bank entities to offer banking services, such as debit cards, loans, and payment services, without having to jump through the hoops of getting a banking charter. Yet the question remains, will BaaS transform how financial institutions do business?

While the financial services industry may be moving toward an era focused on shared data and connected infrastructure, many FIs are hesitant to take the leap. This shift will require new technologies, capabilities, and business models to move forward with a successful future roadmap in this new world of BaaS.


Banking as a Service: How Financial Institutions Can Navigate the Next Banking Revolution

Hear from Levvel and Bank of the West experts on how financial institutions can be successful in the new world of digital banking and ‘Banking as a Service’ (BaaS).

A Practical Approach to BaaS

The banking industry is undergoing radical change through the introduction of emerging technologies such as AI, machine learning, and cloud infrastructure. As a result, remaining competitive has become harder than ever. Many financial institutions (FIs) are attempting digital transformation efforts to satisfy evolving customer needs, including the ease of use.

There are currently many vendors across the bank value chain—with larger vendors often selected over smaller vendors to provide the “best” support and service. However, many FIs are looking to leverage fintech firms to help streamline digital efforts. Fintechs have become a significant disruptor in the space, as they are not held back by legacy systems.

But with over 250 fintech firms in the current value chain, it can be difficult to navigate these options with customer needs top of mind. Needs can vary from bank to bank; what may work well for one institution may not work well for another.

FIs should examine internal capabilities to consider what they can achieve without help. Many smaller FIs have big bank aspirations—but what about these big banks do they admire? What do small and mid-sized banks hope to gain from their success? Choosing the right fintech partnership enables these goals. After determining key milestones, digital strategy becomes more clear.

The Tech in Fintech

Banks are attempting to find ways to modernize their infrastructure while remaining agile and competitive. The current cycle of new product ideas (mobile app, online banking app, etc.) to product expectation is incredibly fast. Product cycles can range from 12-18 months but can be shortened by introducing modern tech tools and infrastructure.

While FIs are more likely than other industries to have started modernization efforts, they are also more likely to still be reliant on legacy systems for business-critical tasks, per Levvel’s Legacy Modernization Report (see where your bank stands with our modernization guide). This reliance threatens banks’ digital transformation, as legacy systems remain an inhibitor of innovation.


Legacy systems can be a significant barrier to digital transformation. These systems often operate in a specific way for a specific product. Configuration and adaptability can be limited, and navigating the replacement of these core, legacy systems can be tricky—and pricey. But configuration, flexibility, and scalability are at the heart of modern technology. This is where technology is headed, and banks have to think about this when looking at their time-to-market approach.

FIs can adjust factors that directly touch the customer by transforming the way the business creates products through BaaS. In changing the underlying infrastructure, banks can become more adaptable and efficient, with better integration with third-party vendors. BaaS can provide the opportunity to create multiple product types with personalization as a priority, making room for new customers and growth opportunities in the banking product space.

Roadmap and ROI: What’s Next for BaaS?

It’s up to each bank to find their differentiation in the digital space. Many FIs are grappling with how to best future-proof their business, while undertaking challenges such as BaaS product offerings, white-labeling, and legacy modernization. Most FIs don’t have the luxury of unlimited resources, so making a future roadmap is critical. Here are some critical next steps when considering Banking as a Service:

  • Alignment: Alignment is critical when it comes to innovation. This ensures nimbleness and preparedness for the unknown—which is inevitable. Be open to trying hard and new things to move the organization forward. Make sure potential fintech partnerships align with future company goals as well. Consider release times, collaboration, and other factors. What does the journey look like?
  • Transparency: In building transparency, trust, and conversation, there will be a united vision for moving forward. Creating an open dialogue will also provide the opportunity to pivot or adjust next steps if needed.
  • Gather Insights and Listen: Gather learnings from not only members of the team, but customers as well. Use product and tech teams to push these needs forward in the best way possible.
  • Look to Fintechs: With a focus on modern tech, FIs can lay out a product roadmap in partnerships with IT using a variety of metrics to define success.
  • Measure Success: Have objectives and OKRs in place to track success metrics. Banking has had some hard metrics when it comes to business cases (core product sales, cost reduction, improved efficiencies), but fintechs have a different lens. There is a large push toward customer satisfaction, customer experience, active users, and brand value. How can FIs better align key performance indicators (KPIs) to meet these metrics?

This guide to ‘Banking as a Service’ is just one consideration when stepping into the new world of digital banking. With traditional business models changing, FIs may consider developing a BaaS strategy with a realistic understanding of cost structure and path to digital transformation.

Authored By

Scott Harkey, Chief Strategy Officer, Head of Financial Services & Payments

Scott Harkey

Chief Strategy Officer, Head of Financial Services & Payments

Meet our Experts

Scott Harkey, Chief Strategy Officer, Head of Financial Services & Payments

Scott Harkey

Chief Strategy Officer, Head of Financial Services & Payments

Scott Harkey is Levvel's Chief Strategy Officer while also leading the Payments and Financial Services work. He has 15 years of banking experience including leading the technology team that implemented digital wallet products at Bank of America along with 10 years of technology merger integration and IT operations outsourcing work at Wells Fargo. Scott brings a unique “insider” point of view combined with a proven track record of delivery to banks, technology providers, and merchants exploring the digital payments space.

Let's chat.

You're doing big things, and big things come with big challenges. We're here to help.

Read the Blog

By clicking the button below you agree to our Terms of Service and Privacy Policy.

levvel mark white

Let's improve the world together.

© Levvel & Endava 2023