Incumbents are making giant strides in the BaaS landscape

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Over the past two decades, the financial service industry has obviously undergone immense transformation, driven chiefly by technological advancements and changing consumer preferences.

Conflict or “nonflict”?

The emergence of neobanks and challenger banks in the 2010s posed a significant problem for incumbent banks, threatening to disrupt the traditional banking milieu. Recent developments have showcased the resilience and adaptability of incumbents.

2000s: The seeds of disruption

In the early 2000s, the fintech revolution began to take shape as entrepreneurs and innovators recognized the untapped potential in reimagining traditional banking services. Challenger banks emerged as a disruptive force, offering banking services almost exclusively through digital platforms. Examples such as Ally Bank in the USA and ING in Europe pioneered the concept of customer-centric, mobile-first banking experiences. By providing user-friendly interfaces, no or low transaction fees, and higher interest rates, challenger banks attracted contemporary, tech-savvy customers.

2010s: The rise of the neobanks

The 2010s saw the rise of neobanks powered by BaaS, where entities didn’t need to have a banking licence because they ​​partnered with traditional banks for core services. Companies like Revolut, Monzo, and N26 gained prominence with their slick mobile apps, real-time spending insights, and innovative features, such as multi-currency wallets and budgeting tools. These agile and customer-focused startups shook the foundations of traditional banking, gaining millions of customers worldwide. Their ability to provide personalized services, fast onboarding, and transparency resonated with customers seeking modern, hassle-free banking experiences.

2020s: Challenges and lessons learned

As the 2020s dawned, new challenges emerged. The rapid growth of fintech disruptors brought regulatory scrutiny, concerns about profitability, and the need to navigate complex financial ecosystems. Some entities faced operational issues and PR setbacks, while others struggled to achieve sustainable revenue streams. Still others faced technical constraints. while others had to deal with compliance and fraud concerns. Silicon Valley Bank, for example, known for serving startups and tech companies, grappled for a time with operational difficulties and poor investment choices, and was finally sold to First Citizens. With these challenges to new banking concepts, though the concept of BaaS was shown not to be as immaculate as many assumed, the vast majority of market experts realized it was a simple transition period where BaaSwas shifting its focus towards its true mission: empowering brands to launch financial services.


BaaS is and will remain a fundamental part of the landscape because it enables businesses, particularly fintech startups, to access and integrate financial services easily. It eliminates the need for companies to build services from scratch, reducing development time and costs. BaaS fosters innovation, allowing businesses to focus on their core offerings while providing a wider range of financial products to customers. This accessibility democratizes finance, encouraging competition and ultimately improving financial services for consumers and businesses alike.

Don’t call it a comeback

Amidst the challenges faced by neobanks and challengers, incumbent banks demonstrated their staying power and adaptability, mostly due to being able to leverage their size and relative dependability. They capitalized on their vast customer bases, regulatory compliance expertise, and extensive branch networks to maintain a competitive edge. Additionally, incumbent banks began recognizing the need to adapt to changing customer expectations and digital transformation.

Customer trust

Incumbent banks’ centuries-long presence in the financial industry had built trust among consumers and businesses. In times of economic uncertainty or crisis, people tend to seek stability. Additionally, incumbent banks’ adherence to stringent regulatory frameworks and robust security measures offers a sense of dependability and the apparent protection of financial assets.

The shift

One of the significant turning points for some incumbent banks has been their simple recognition of the potential offered by BaaS, literally a case of “if you can’t beat ‘em, join ‘em”. Many incumbents have embraced BaaS to diversify revenue streams, collaborating with forward-thinking fintechs to offer a wider range of services to their customers. By adopting BaaS-like offerings, incumbent banks are effectively competing with neobanks and challengers on the digital front.

  • JPMorgan Chase has launched its BaaS platform, “Chase for Business,” which provides businesses with integrated banking and financial services, including payments, invoicing, and transaction processing. This initiative allows the bank to extend its reach beyond traditional banking services and attract startups and small businesses seeking integrated finance solutions.
  • Bank of America has collaborated with fintech company NovoPayment to offer BaaS capabilities to its clients in Latin America. The partnership enables BofA to expand its presence in the region and serve clients’ cross-border payment needs more efficiently.
  • BBVA has launched its Open Platform, a new digital solution that gives third-party developers access to the bank’s capabilities through APIs, thus allowing BBVA to tap into the fintech ecosystem. This gives developers the means to build innovative financial applications using BBVA’s infrastructure.

Getting the balance right

The evolution of BaaS and its effect on incumbent banks has created a dynamic and competitive financial ecosystem. Incumbents have demonstrated their resilience, adaptability, and strategic advantages in size and dependability. By embracing BaaS-like offerings, incumbent banks have found new avenues for growth and relevance in the digital age.

There’s room for everyone. One of Toqio’s missions is to democratize the creation and delivery of digital banking and finance solutions. Our platform is neutral, we work with neobanks, challengers, and incumbents alike. One of our greatest assets is our protean nature in terms of multi-banking, where our customers can shop around for the best products from reputable providers and pick and choose the services they want to offer. Having that level of freedom, choice, and fair competition is nothing but good for the market.

Looking ahead, the future of banking is likely to strike a balance between fintech disruptors and established incumbents. Collaboration and partnerships between incumbents and fintech startups will drive innovation, offering customers the best of both worlds: cutting-edge digital experiences from neobanks and challenger banks complemented by stability and the breadth of services of incumbent banks.

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