Analyzing the Rapid Growth of FinTech-as-a-Service (FaaS)

January 25, 2022

FinTech-as-a-Service (FaaS) is making waves in this age of aggressive digitalization. Traditional financial and non-financial companies use FaaS provided by FinTech service providers to make their solutions more efficient and consumer-friendly. FaaS leverages modern technology to aid multiple segments, including Lending, Credit, and Payments, in resolving long-standing challenges. Add to it the rising popularity of digital systems such as online lending, wealth management, and robo-advisors, and FaaS becomes an indispensable part of the urban ecosystem which is rapidly expanding to rural areas. 

Assimilation of FaaS

Businesses are increasingly turning to FaaS to optimize their processes and increase efficiency. Customer satisfaction and customer retention are two compelling reasons why numerous companies are now adopting FaaS. Legal compliance and optimal security mechanisms are additional benefits. Using FaaS, financial and non-financial companies can automate their financial processes and offer customers hassle-free access to credit and services. 

FaaS automates financial processes and makes them efficient, eliminates cumbersome paperwork, and reduces human intervention. Robotic automation frees up working hours for more valuable tasks. The result—streamlined workflows, thorough document analyses, and quick results. By integrating FaaS, companies can significantly reduce the turnaround time for the entire financial process and improve customer experience.

London-based FinTech payments and banking services company Rapyd has witnessed strong growth in the past few months. The company uses its single global and scalable Application Programming Interface (API) to offer subscribers comprehensive financial management, money movement, and payment services. The API acts as a bridge between modern technology and legacy structures. Rapyd’s tremendous growth testifies to the wide acceptance of FaaS.

Exponential Growth and Value Addition

Reports suggest that the global financial services market will grow to $2.25 trillion in 2021, expanding at a 9% CAGR. By 2025, the market is expected to touch $2.85 trillion at a 6% CAGR. 

The number of FinTech companies is rising. According to reports, as of November 2021, the Americas, EMEA, and APAC had 10,755, 9,323, and 6,268 FinTech startups, respectively. 

Non-finance segments such as EdTech and e-commerce are increasingly adopting FaaS. The EdTech space, for example, is registering explosive growth because of companies offering a variety of pay-per-use services. FaaS ensures proper disbursal of services and wide reach for non-financial companies by resolving payment bottlenecks. Further, companies can use the massive volumes of data captured by FaaS to assess creditworthiness and boost payments on e-commerce sites. FaaS facilitates hyper-personalization by collecting and analyzing consumer behavior data. E-commerce platforms can curate products and payment options based on this data.

Major Players – Domestic and International

Globally, FaaS is dominated by major players such as Neo Mena Technologies (a company that offers integrated investment services), US-based Global Integrated FinTech Solutions (a firm working toward offering anti-money laundering services), and US-based Fafnir (a firm that helps companies evaluate loan applications). These companies are revolutionizing the international FaaS market by harnessing new-age technologies such as Artificial Intelligence (AI), Machine Learning (ML), and automation. In India, startups such as Instamojo—a company that assists businesses by collecting fees, shipping goods, facilitating loans, and creating online stores—and Razorpay—a full-stack financial solutions company dominating the online payments space—are fiercely competing with new entrants.

FaaS has tremendous potential for growth and is finding many takers. Bringing together the old and the new and bridging the gap between legacy structures and next-generation technology, FaaS hints at how the hybrid new world will develop going ahead. Moreover, with companies keen on improving financial processes, reducing human intervention, and increasing personalization, FaaS is likely to see quick and sustained adoption by financial and non-financial companies in the years to come.

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