The State of BaaS and How It’s Moving Forward


June 23, 2022



Banking as a service (BaaS) is a model that draws on financial institutions’ resources in order to allow non-banks to offer banking services to customers. Financial technology companies (FinTechs) can use BaaS to provide everything from financing plans such as buy-now-pay-later options, branded lines of credit, investment services, money transfers, and an array of online banking options to customers without holding a banking license.

Banking is a traditional and tightly regulated industry that can be slow to adopt new technology. But BaaS is disrupting the industry as customers increasingly expect easier access to their finances. As a result, financial institutions are seeking ways to partner with FinTechs via BaaS services to expand their customer base.

But these partnerships aren’t straightforward. They require a deep understanding of banking services, local and international regulations, and high-level tech skills to build a cooperative ecosystem that can evolve, scale up, stay cost-effective, and work within the boundaries of a company’s tech capabilities.

Levvel recently conducted its 2022 Banking-as-a-Service Survey, finding that non-banks are increasingly adopting BaaS services to stay competitive as opportunities for revenue growth and customer interest grow. Below, we’ll look at some of the survey results that indicate where the technology stands now and where it’s likely to head in the future.


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.

The Current State of BaaS

Financial institutions (FIs) and FinTechs are searching for ways to appeal to customers and explore new forms of revenue growth. BaaS has been a key part of FI modernization initiatives. For FinTechs, BaaS offers novel ways of increasing engagement with customers by providing true banking services.

Levvel’s survey found that FinTechs are becoming increasingly interested in partnering with financial institutions to offer BaaS services, despite conceptual and technological challenges on each side. Of the over 200 financial executives from FinTechs and companies using financial technologies who replied to the survey, 88% planned to offer BaaS services, while 8% had already gone live.

Executives also shared their motivations for offering—or planning to offer—BaaS services, chief among which was the ability to attract new customers. This was followed by increasing revenue and customer demand. Interestingly, the most common services offered via a BaaS partner were financial management, investment services, deposits, and merchant services, which typically fall outside the pure banking ecosystem. This strategy allows both sides to expand their customer base rather than enhance existing customer experiences.


The Future State of BaaS

The major challenge companies need to conquer is formulating partnerships with the right service providers. Clarifying product needs, technological capabilities, roadmaps, timelines, and long-term plans for growth requires all parties to be on the same page and use the same vocabulary, which has typically been a challenge. When partnerships fail, it’s often due to a lack of clarity, transparency, or shared vision.

Levvel’s survey found that the most common challenges FinTechs had with their current BaaS providers were platform integration issues (33%), the ability to scale (26%), partner responsiveness (24%), and expensive pricing (23%). While some of the problems cited could be rectified with more communication prior to implementation, post-implementation challenges are harder to respond to, especially if they require switching partners after a contract has been signed.

Over 60% of respondents found the challenges they faced with BaaS partners to be significant enough to make them at least somewhat likely to switch partners. In the future, FinTechs seeking partnerships can avoid wasting time and money by seeking out experienced and knowledgeable BaaS partners and considering using multiple partners to flesh out their offerings.

Moving Forward with BaaS

Despite the complexities involved in choosing institutions to partner with and grappling with technological issues, there is every reason to believe this industry will continue to grow. Customers increasingly see the convenience BaaS can offer them when dealing with their finances. This means BaaS will become critical to gaining a competitive advantage for FinTechs and FIs.

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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