Banking-as-a-Service (BaaS) will provide the plumbing for "at least half of banking activity in the medium to long term", according to a top executive with Natwest's BaaS offering.
Speaking on the Tech.eu podcast, George Toumbev, chief commercial officer, NatWest Boxed said:
“There is no doubt that Banking-as-a-Service as a model will be key to the provision of financial services in the future. To me that’s a fact.”
BaaS can be defined as a service whereby regulated financial institutions deliver financial services, such as debit cards and KYC, to non-banking businesses.
The BaaS model is facing some challenges of late. The high-profile collapse of US BaaS provider Synapse earlier this year and recent major job cuts at German BaaS provider Solaris have cast a pall over the industry.
But Toumbev gave an upbeat assessment of the prospects of BaaS, particularly for those with banking licences like NatWest Boxed.
He said:
“In the long term, banks are the natural custodians of this Banking-as-a-Service capability. Why? Because they own the balance sheet and the banking licence.
“Fintechs are amazing at product development, and product market fit. But there reaches a point where fintechs need to grow up because banking is highly regulated."
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