How BaaS Can Unlock New Revenue Streams for Banks

The latest episode of The Fintech Show brings together industry leaders to explore the rapidly evolving Banking-as-a-Service (BaaS) landscape, according to FF News. Rivo Uibo from Tuum, Gabriel Viera from Zenus Bank, and Daniel Rowlands from LHV Bank discuss the transformative potential of BaaS and its capacity to generate new revenue streams for banks.

The BaaS market has seen tremendous growth, valued at $15.9 billion in 2023 and projected to expand to $64.7 billion by 2032. According to Tuum’s co-founder Rivo Uibo, this expansion is driven by banks’ need to remain competitive by leveraging existing infrastructure and exploring innovative revenue models.

Initially focused on providing basic services to fintechs, BaaS providers are now addressing more sophisticated needs, emphasizing compliance and economic viability. Companies like LHV and Zenus are prioritizing high-value integrations tailored to specific client segments, ensuring sustainable growth.

Daniel Rowlands from LHV highlights the importance of seamless onboarding in enabling fintechs to scale across jurisdictions. Efficient KYC (Know Your Customer) and KYB (Know Your Business) processes are key to reducing administrative hurdles.

LHV’s open approach, featuring publicly available APIs, fosters transparency and encourages collaboration. This strategy has enabled the bank to expand its presence beyond Estonia into the UK, offering retail banking and payment initiation services.

Zenus Bank has revolutionized customer engagement by enabling Latin American super apps to offer U.S. banking services. Gabriel Viera, Chief Compliance Officer at Zenus, emphasizes the role of APIs in providing a customized and frictionless user experience. By evolving from a digital bank into a versatile platform, Zenus has expanded its market reach and attracted new demographics.

Modern banking platforms require cloud-native, API-first architectures to scale efficiently. Uibo explains that by leveraging microservices and asynchronous processing, institutions can handle high transaction volumes while ensuring 24/7 availability.

Rowlands from LHV underscores the significance of data in optimizing payment processing. By navigating complexities like IBAN discrimination and varying acceptance rates, LHV helps fintech clients identify optimal payment routes, improving transaction outcomes.

While open banking presents opportunities, it also faces challenges such as compressed margins and intense competition. Rowlands advocates for moving beyond basic transaction services to tackle complex issues like fraud prevention and payment orchestration—areas where businesses are willing to invest.

Tuum’s expertise in banking infrastructure, rooted in decades of innovation, sets it apart in the BaaS market. From developing real-time transactional systems to microservices-based platforms, Tuum has consistently pushed the boundaries of what banking technology can achieve.

The discussion highlights how agile, technology-driven ecosystems are reshaping banking and creating new revenue opportunities. By focusing on seamless onboarding, customer engagement, and scalable technology, industry leaders like Tuum, Zenus Bank, and LHV are paving the way for a more dynamic and accessible financial landscape.