Banking-as-a-Service Platform Promising as Growing Sector

What services do banks provide to individuals? They allow people to pay bills, borrow money, deposit funds. They are a safe place to store money. During the pandemic, they provided structures for the distribution of Economic Impact Payments, or stimulus checks.

Not everyone has access to banking services, however, and helping to democratize and disseminate these services are Banking-as-a-Service (BaaS) platforms, a key component of open banking enabling third parties to provide banking services.

Essentially, BaaS allows a licensed banking company to provide a non-banking company with financial features to build into their products. A simple example would be Robinhood’s debit card product, or Chime’s checking account and debit card suite.

“As the pandemic has seen a spike in digitalized transactions and contactless payments at retail stores and restaurants, more and more businesses are experiencing the need for banking and financial services embedded in their products,” Ari Stiegler, managing partner at venture capital firm Flux Capital, said. “One company making a splash in the BaaS sector – while providing companies an innovative way to offer banking services – is Unit.co.”

Unit.co team members, investors and advisors have worked at leading companies, including Venmo, Google and Lemonade. Based in San Francisco, Unit.co allows third parties to integrate banking services—including accounts, cards, payments and lending—into their own businesses using an Application Programming Interface (API).

According to Tech Crunch, Unit.co had raised close to $20 million in funding upon its launch in December 2020.

The leadership of Unit.co—CEO Itai Damti and CTO Doron Somech—have Israeli roots, while their compliance leadership comes from one of the world’s most fintech-forward banks. On its website, Unit.co says it can help a company “build banking in minutes… Unit owns the heavy lifting of compliance and bank relationships so you can build, launch and grow faster.”

Unit.co recently worked with Wethos, a fintech company giving creative entrepreneurs the chance to grow from scrappy teams to scalable businesses. Through a partnership with Unit.co, Wethos was able to embed banking and payment tools to serve clients.

Unit.co has also partnered with Abound, which seeks to improve the financial wellness, wealth and security of millions of self-employed Americans.

“As a result of the pandemic, more Americans than ever are working from home, and open to digital only neo-banks such as Chime and Revolut. These neo-banks often rely on BaaS platforms to connect with traditional banks for account issuance, debit card issuance, and more” Stiegler, whose fund is focused on corporate leaders in winner-take-all markets, said.

BaaS and Unit.co are part of the growing fintech space, a portmanteau of “financial” and “technology.” Fintech is a relatively recent phenomenon and emerging industry, said Stiegler, a three-time startup co-founder.

“High-profile examples of fintech include Venmo, PayPal and even Robinhood, the commission-free stock trading and investing trading app that has seen exponential growth during the pandemic,” Stiegler said.

While BaaS is a relatively new industry, people in the financial sector are becoming more familiar with the concept as tech-industry leaders and fintech advocates discuss how promising it is on social media platforms, from Clubhouse to Twitter.

And as BaaS becomes more well known, Stiegler is confident companies like Unit.co will become increasingly successful.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes