Banking as a service—where organizations provide retail banking products using an existing licensed institution’s infrastructure—is expected to reach a value of $7 trillion by 2030, according to a new report from core technology provider Finastra. The survey of 1,600 senior executives also found that the service is expected to grow 25% per year for the next three to five years. Eighty five percent of senior executives responded that they are already implementing banking as a service or are planning to within the next 12 to 18 months.
Banking as a service for point of sale financing, including buy now pay later and interest-bearing point of sale loans, is expected to grow 104% by 2024, according to the report. Meanwhile, banking as a service for bank accounts and payments, including payment cards, is poised for 30% growth by 2024, Finastra said, but added that beyond 2024, there will likely be reduced growth as the market becomes more saturated.
Looking at financial institutions specifically, the survey found that more than 70% expect to pivot to banking as a service for small and medium enterprise lending and corporate banking, even though volumes are currently low. More than 80% of financial institutions expect the overall banking as a service market to grow, and of those, 30% expect it to grow by more than 50% over the next five years.