NEWSLETTER 4.0

Banking as a Service (BaaS) is a model that allows third-party entities, typically non-banking institutions like fintech companies or retailers, to offer banking services to their customers without having to build and maintain the traditional banking infrastructure themselves. It involves banks opening their core banking functionalities and data to third-party developers via APIs (Application Programming Interfaces). Why are they doing this? For a company to have functions like a bank it needs to obtain a banking license which is a very difficult, time-consuming, and recourse-intensive process. Developing and maintaining a comprehensive banking infrastructure requires significant investment in technology, compliance, and operations. By leveraging the existing infrastructure and expertise of non-banking partners, banks can reduce costs associated with expanding their service offerings. BaaS enables banks to diversify their revenue streams by tapping into new markets and customer segments through partnerships with non-banking companies. This can help mitigate risks associated with traditional banking activities and economic fluctuations. Banks can extend their reach and offerings without incurring substantial costs, while non-banking companies can enhance their product or service offerings by integrating banking services seamlessly.

BaaS is now becoming a very mainstream and popularized term. Many companies are starting to get into the market and one of the most notable startups is Griffin. What is most exciting about them is they were able to raise twenty-four million dollars in capital on top of their original twenty-eight million and secured a banking license in just about a year which has investors excited. Griffin isn’t a direct BaaS to consumers but rather to larger companies to simplify their embedded financial transactions. Griffin's founders, David Jarvis and Allen Rohner, bring significant expertise to the table. Jarvis, a former engineer at Standard Treasury, also worked on infrastructure at Airbnb. Rohner founded software startup CircleCI. Together, they authored "Learning ClojureScript," a guide to the language Griffin uses for its systems.

The rise of Banking as a Service (BaaS) marks a pivotal shift in the financial sector, where traditional banking institutions partner with non-banking entities to offer financial services. This collaboration allows banks to tap into new markets and customer segments without the capital-intensive investments typically associated with expanding their infrastructure. Griffin, a standout player in this arena, has captured attention by securing significant funding and obtaining a banking license within a remarkably short timeframe. Griffin exemplifies the convergence of innovation and industry know-how driving the proliferation of embedded financial solutions. As BaaS continues to gain momentum, its cost-saving nature is raising the interest of consumers and non-banking companies.