While this model is undoubtedly effective in launching BaaS, it fails to meet the requirements of the other participants in the financial ecosystem. On the one hand, banks complain that core dependency hinders their ability to innovate. But, on the other hand, they continue to follow the dreaded path of layering and patching up in response to BaaS.

All members of the financial ecosystem's expectations are compared to what is trending in technology today and to what 40-year-old mainframes can deliver. The present innovation has democratized reasonableness, and aside from making a level battleground, it is likewise setting new administration benchmarks. For example, customers benefit from not having to pay for expensive hardware. Unlike ten years ago, when using Amazon, Azure, or any other synapse financial technologies cloud provider, installing a server takes less than an hour. It is now 100 times cheaper and 1000 times faster than ten years ago.

Twenty years ago, good CRM software was only available to businesses that could afford to spend hundreds of thousands of dollars. However, today, the same sophisticated CRM can be purchased for a few hundred dollars by even a small business in less than five minutes.

Banking is no exception; it is time to reset. It is time to reset banking technology to provide cost-effectiveness, ease of use, and agility for adoption, particularly now that banking services are the hidden challenges of a changing financial ecosystem.

So, what alternatives do banks have?

1.     Change the core?

Banks shouldn't waste time and money ripping out and replacing their legacy core because it's a complicated, high-risk option that costs a lot. Instead, without burdening the workhorses with the demands of embedded finance today, let them deliver what they were designed to do.

2.     Hold off until the core provider steps in?

Banks that rely on legacy core providers cannot compare their transformations to those of competitors; somewhat, they are restricted to the areas of their core providers' frequently sluggish and organic innovation strategy. As a result, banks have lost market share in the new landscape due to decades of patient waiting, exponential costs, and awkward contracts.

3.     Add a layer of middleware?

In addition to limiting the bank to what the legacy core offers, adding a middleware layer still uses outdated technology that requires maintenance. It simply connects the bank's various silos and allows it to communicate with the underlying legacy core. As a result, banks are still left with abandoned information in unusable arrangements, generating pointless upkeep expenses and above.

Then, which model is best for BaaS?

Banks can launch a parallel digital core in the cloud in less than an hour without ripping and replacing the body. This is a thousand times faster than a typical core overhaul project that takes two years and costs much less. With pre-built connections to the Federal Reserve (ACH, Wires, and FedNow), The Clearing House (RTP), SWIFT, and card networks, as well as components for customer onboarding, KYC, OFAC, fraud management, workflow controls, audit, and end-user experience, Finzly's digital core and Payment Galaxy, the payment hub, can launch a new bank in less than an hour. It's as easy as using Legos to construct your ideal home.

Finzly's Programmable Bank The approach taken by Finzly is to remove any innovation from the core, allowing you to construct your brand-new contemporary home adjacent to it. Finally, unlike BaaS synapse financial technologies middleware, which still relies on dated legacy systems for backend processing, it offloads the workload from the legacy core. Banks save money by not having to pay for each statement, account, card, and other bells and whistles by processing payments and deposits outside the legacy core. In addition, banks can confidently offer APIs to talk to other vendor applications, Banking as a Service API to fintech partners, and virtual/FBO accounts operated outside the core with only three lightweight API calls to the legacy core because they are no longer reliant on the core providers for innovation.

Why is this model advantageous to banks? Finzly's Digital Core and Payment Hub for Banking as a Service

1.     This model improves the instalment experience for clients, giving them a FedEx experience of just stressing over the speed and cost of moving cash. Finzly intelligently routes payments through the most suitable payment rail that meets the customers' priorities based on these priorities. 

2.     Banks can immediately adopt the payment networks of their choice because the legacy core has been relieved of the responsibility for processing payments. Finzly recently launched wires for one of the banks on our digital body. When the bank decided to add the ACH rail, it only took a day to set up the ACH service. The bank only needs one more day to offer FedNow to its customers once it is operational. The demands of the 82% of Americans who already make use of digital payments cannot be met by banks queuing up with their core providers to connect to Zelle. Banks need the force of innovation to bring alive instalment rails and fintech organizations in a day.

3. Banks do not need to deal with multiple payment systems—one for ACH, wires, RTP, Swift, FedNow, and so on. they are connecting to Core, AML, Fraud, Risk, GL, Warehouse, and some other payment ecosystems simultaneously. All instalments, regardless of the rails, are handled and accessible in one instalment centre point, with a solitary association with the eco-frameworks, offering straight-through handling, saving expenses, and expanding productivity.

4.     There is no need for an additional middleware provider because Finzly's platform comes pre-installed with Banking as a Service API. This simplifies the technology stack, reduces manual steps, increases efficiency, and reduces costs.

5.     The Finzly platform provides rich information to fintech via webhooks, enabling them to post the incoming credits in real-time. As a result, fintech can eliminate the manual processes associated with incoming payments, incorrect routing, errors, and repairs.

6.     Digital wallets in any asset class—USD, foreign currency, cryptocurrency, or reward points—can be created by banks. The multi-resource, multi-cash record is worked for the economy representing things to come.

7.     Banks can either operate FBO accounts and serve as the ledger for fintech, allowing them to access funds through APIs, or they can operate FBO accounts and allow fintech to maintain their registration.

8.     The global treasury and the cryptocurrency industry rely heavily on managing these assets' P&L, as well as buying and selling foreign currency. These features are readily available through the platform's pre-built cross-asset foreign exchange module.

9.     The bank's brand-new, cutting-edge capabilities are synapse financial technologies easily layered on Finzly's customer experience platform. For example, from Finzly's current digital login, customers can sign in once to the customer experience platform.

10. Customers can have multiple levels of parent-child relationships, letting the parent entity manage the child entities without using numerous accounts at the entity level.

Because banks spend up to 80% of their budgets maintaining legacy technology, providing BaaS through middleware adds to the upkeep cost. This is especially true when considering the size and volume of customers and transactions that BaaS could bring to banks. Few forward-thinking banks have hired Heads of Innovation/Banking as a Service/Strategy who genuinely comprehend the advantages and disadvantages of each model, despite vendors offering banks multiple options. The banks should go with a model that is easy for customers, easy for bankers, faster to market, cheaper, and, most importantly, good for the bank's long-term health!