Build or borrow? BaaS lets tech firms offer varied financial services

IN FOCUS

In today’s newsletter, we look at:

• How a new generation of banking-as-a-service (BaaS) players and tech providers are helping banks and their clients offer embedded financial services at a fraction of the cost and time
• How DBS’ year of record earnings was also a year of service disruptions
• Digital bank operator TymeGroup’s game plan for winning in the Philippines and Vietnam

Welcome to The Top Up! Delivered every fortnight via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. Get it in your email inbox by registering here.

Hi there,

Today, many of us have the option of renting something instead of buying it – from clothes to cars, home appliances to houses.

Similarly, many tech companies today – like ecommerce and ride-hailing platforms – want to embed financial services into their offerings, but they typically don’t have the required licenses and the expertise to do so. One option for them is to “rent” the expertise from banks.

However, as my colleague Melissa shares in this week’s featured story, many banks are burdened with legacy infrastructure and may not be in the best position to offer their services to these tech firms.

That’s where tech providers like Audax come in. The company helps banks that are looking to work with these businesses offer financial services to users. Or, firms can also choose to work directly with fintech-as-a-service providers like Hugo Hub to enable different financial services.

New digital bank entrants launching using a banking-as-a-service (BaaS) model can do so with a lower customer acquisition cost: around US$20 instead of the typical US$100, or at least that’s what Audax CEO Kelvin Tan says.

The theme of whether to own/build something or to rent it from someone else continues in this week’s Hot Take, where I look at how DBS has taken a different approach to managing its data compared to its peers UOB and OCBC.

— Simon

THE BIG STORY

Out with the middlemen: more firms tap banks and BaaS providers for embedded finance

Image credit: Timmy Loen

Using banking-as-a-service solutions, digital banks can lower the cost of acquiring a new customer from US$100 to US$20, tech provider Audax claims.

THE HOT TAKE

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FYI