Implementation Barriers to BaaS and How to Overcome Them


June 17, 2022



Banking as a service (BaaS) has revolutionized the way companies and customers conduct transactions, making interactions so smooth and convenient that the complexity behind the scenes goes mainly unnoticed by end-users.

However, end-to-end digital banking via web-based financial services requires enormous research and investments from both financial institutions (FIs) and financial technology companies (FinTechs). Forming partnerships, evaluating and selecting services, navigating diverse banking regulations, ensuring scalability, and protecting customers are all challenging processes made even more urgent by increasing customer demand.

In light of the disruptive nature of BaaS, it’s no surprise that there have been pain points and barriers to adoption on the part of FinTech investors. Managing a complex and evolving service environment requires great trust in financial partners and the ability of multiple stakeholders to execute a viable roadmap that is also flexible and scalable.

Levvel’s 2022 Banking-as-a-Service Report has been produced to help FinTechs assess their BaaS implementation options. Below are some of the barriers companies face in this space and suggestions on how to overcome them.


Levvel's 2022 Banking-as-a-Service Report is here.

Levvel’s Banking as a Service (BaaS) report reveals the state of BaaS implementation among FinTechs and the value of selecting the right BaaS partner.

What Is the Current State of BaaS?

While FinTech has been a disruptor to the financial services market for years, it is now poised to become standard. Levvel’s survey showed that 88% of over 200 FinTech companies were considering (37%) or actively pursuing (51%) a BaaS partnership, driven by customer demand, a desire to attract new customers, and the possibility of increasing revenue.


The survey found that FinTechs typically start by providing BaaS services such as financial management, which includes budgeting, tracking, spending analytics, and other financial wellbeing services (67%); investment services (53%); and deposits (48%).

Companies seeking to expand their services were primarily concerned with further financial management options, merchant services, and cross-border payments. This suggests that financial institutions looking to build BaaS functionalities to attract FinTech companies are more likely to be successful if they create integrations that provide these options first.

What Barriers Do Investors Face When It Comes to BaaS Implementation?

FinTech companies new to BaaS are typically unaware of the variety of product offerings available, so research is crucial. The next step is finding a suitable partner institution, particularly one that shares a FinTech’s visions of the services they’d like to offer.

Even after partnerships are formed, FinTechs face BaaS implementation barriers. Levvel’s respondents listed compliance, legal, and security concerns as their top barriers (35%), followed by a lack of understanding of available products (27%), and the need to onboard additional service providers (26%). Many of these concerns arise from an incomplete understanding of how BaaS providers operate, making both the preliminary research and subsequent onboarding processes crucial for FinTechs.


In addition, BaaS providers may not offer the full suite of services a FinTech wants in their portfolio. This makes trust and transparency an essential part of the partnership equation since it may require adding additional BaaS providers—which may come with technical constraints and competing priorities—or both sides agreeing to develop these services in the future.

How Can Financial Institutions and FinTechs Overcome Challenges and Implement a BaaS Plan?

There’s no step-by-step plan for achieving the perfect clarity of vision or precise roadmap to success, but there are ways to learn from the past and formulate new best practices.

Carefully vetting partners and ensuring both sides are on the same page—and using the same vocabulary—is a time-consuming task that often requires repetitive educational meetings with different stakeholders, but it pays off while trying to formulate a roadmap and agree on the scope of the work.

Capability and reliability are paramount, and the best BaaS providers do all they can to ensure clients are put at ease before agreeing on a vision and a timeline for implementation and the introduction of any new features. Of course, adding pricing options into this conversation can further complicate matters. Levvel’s research found that only one-third of providers offer flat-fee services, while the rest provide customized pricing. And because no one can predict the future, FinTech companies need to ensure that their costs don’t grow faster than the services offered, which requires both research and trust in a partner.

Once a FinTech has vetted a partner, the next challenge is formulating a contract that allows for flexibility if the implementation stage does not go as planned. Getting out of a contract can be difficult, expensive, and time-consuming, so it’s crucial to clarify how and when a partnership may end or be supplemented with new partners.

Twenty percent of Levvel’s survey respondents said that when BaaS partnerships fail, they did so because of implementation failures that could have been rectified with more discussion in the planning stages. Unexpectedly high prices and a lack of relevant offerings are often discovered upfront, but problems such as platform integration issues, the inability to scale, and partner responsiveness may not be evident until later. In fact, over 60% of respondents said they were at least somewhat likely to switch partners at some point, and only 6% were not at all likely to switch. Starting the partner-vetting process all over again can be a time-consuming and costly process.

Avoiding BaaS Implementation Challenges

FinTechs looking to enter into a partnership with a BaaS provider need to overcome many challenges, and there’s no way to avoid them all in a constantly evolving tech space. However, best practices can save a lot of time, money, and frustration in the long run. Chief among these are researching the BaaS space, becoming knowledgeable about offerings, and being realistic about a company’s short- and long-term plans. This strategy ensures more fruitful conversations with BaaS providers and fewer surprises and implementation challenges down the road.

For more information on the current state of BaaS, read the complete 2022 Banking-as-a-Service Survey by Levvel, an Endava company.

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.

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