What Is Fintech-as-a-Service?

Financial technology-as-a-service, shortened to fintech-as-a-service (FaaS) refers to the third-party provision and maintenance of financial technology that allows anyone to offer financial services. From payment gateways to online fundraising, peer-to-peer lending, virtual bank accounts and one-click purchases, FaaS powers every financial transaction that we perform online.

What Is Fintech-As-a-Service?

What started as back-end programming for financial institutions has become a huge industry. So much so, in fact, that financial technology is expected to have a global market of €330 billion by 2026. As technology experts, fintech companies allow any individual or company to provide financial services through the use of white-label application programming interfaces (APIs) that can be customised with the company’s own branding, colour scheme and desired features. Access to the API module (such as a third-party payment platform) typically costs a monthly fee, which includes technical support and upgrades as well as the plugin module itself.

How FaaS Benefits Companies

With fintech-as-a-service, small and medium-sized businesses and large corporations can generate revenue through the financial services they offer while a third-party fintech company takes care of PCI-DSS compliance (including encryption), fraud protection, upgrades, bug fixes, integration support and technical support in general. This partnership allows both parties to focus on their core business and saves money on in-house developers and tech support.

What Can Merchants Achieve with Fintech-as-a-Service?

Accept Payments

E-commerce merchants need a way to accept payments online, and for those that don’t have the time, knowledge or personnel in-house to build a proprietary payment gateway, FaaS payment providers offer a ready-to-go solution that allows you to get your payment flow up and running and sell your product to the world.

Typically, a FaaS payment provider offers everything a merchant needs to accept payments and manage their business online:

• A securely encrypted global payment gateway that accepts multiple payment solutions such as credit and debit cards, buy-now-pay-later, bank transfers, mail order and telephone order (MOTO) payments and local payment methods

• Multi-currency capabilities that allow you to accept global payments and settle them to your bank account in the currency of your choice

• Fraud and chargeback prevention tools that authenticate purchases and block or flag suspicious transactions automatically

• A wide range of merchant services, including real-time transaction records, sales reports and analytics, recurring billing and customer databases

Make Digital Payments

Fintech-powered digital payment apps like PayPal and CashApp allow customers to make international and local payments at the click of a button (or tap of a screen) for online purchases and swipe, chip or near-field communication payments in-store.

Virtual Banking

Mobile banking services such as Revolut and Monzo operate like traditional financial institutions—offering savings accounts, debit cards and even home loans, except without tellers, ATMs or international borders. With the help of a fintech company that offers FaaS, businesses can launch their own virtual banks and generate revenue by offering financial products on par with traditional banks.

Financial Management

Financial management apps, such as You Need a Budget (YNAB) and Quicken, help customers view all of their financial information in one place, set budgets and pay bills. For companies, bookkeeping and accounting solutions powered by FaaS can streamline in-house financial management and help you make sound business decisions.

Move Money

Fintech-as-a-service can be used to offer money-movement services, including international remittances as well as transfers within local payment networks. Companies who outsource a lot of their work to international contractors and employees can save a significant amount of money with white-label money-movement services.

Invest in Shares

FaaS solutions for investing include investment apps and robo-advisor services. Apps like Saxo Bank and Interactive Brokers allow individuals and business entities to trade assets like stocks, cryptocurrencies and ETFs from mobile devices with very low or even no commission, helping you make money from investments for less. Robo-advisors go one step further and invest your or your company’s money automatically, following sound investment rules.

Raise Funds

If you’re looking for a way to gather capital for a new enterprise, financial technology-as-a-service could help you raise funds. Peer-to-peer lending apps like PeerBerry and Robocash allow you to receive micro-loans from family, friends and even complete strangers to help you start a new business. In 2020, peer-to-peer consumer lending in Europe was valued at €2,958 million, and peer-to-peer business lending in Europe was valued at €1,880 million.

Trade Cryptocurrencies

Concerns about market volatility, security and regulations have led to cryptocurrencies growing in popularity as a payment method. FaaS apps allow customers and businesses to buy, sell, hold and transact in digital tokens like NFTs and cryptocurrencies like Bitcoin.

Gather and Process Data

Large-scale data collection and processing is one of the major benefits of fintech-as-a-service and the concept of open banking, in particular. As transactions are completed and recorded digitally, FaaS bots analyse the financial data to give individuals and businesses greater insights into their income and expenditure. For merchants, data generated around customer behaviour can help you market your products more effectively and take steps to increase your average order value.

Security and Regulation

Fintech-as-a-service solutions are regulated by national and international bodies to make sure they comply with data protection best practices and prevent money laundering and fraud.

• In the United Kingdom, all financial institutions must register with the Financial Conduct Authority (FCA).

• In the United States, all money services businesses (MSBs) must register with the Financial Crimes Enforcement Network (FinCEN).

• In Europe, the General Data Protection Regulation (GDPR) applies to all businesses and Fintech companies that collect and store customer data.

To ensure compliance without raising costs, many fintech companies use regulatory technology (RegTech) to ensure legal compliance with all relevant regulations, ensure customers’ privacy selections are followed and automate the generation of compulsory reports.

The Right FaaS Partner for Your Business

If you’re like most merchants, you want a simple solution that will allow you to maximise your earning potential when selling goods and services online. You also need a platform that’s secure so you and your customers don’t fall prey to theft.

For best results, look for a FaaS provider that’s registered with the relevant authorities, maintains PCI-DSS compliance and offers all of the services you need. Together, you can go a long way.