With growing customer demand, increased competition, and the need to improve offerings, companies are forced to accelerate their digital transformation almost daily. Owners of both small and large businesses have a question – to create their own solution or resort to ready-made services of fintech platforms. In this article, you will learn how the set of payment instruments differs from Fintech-as-a-Service. You can also contact Kindgeek fintech software development company to discuss the details of creating a fintech product.
What Is Fintech
Fintech is the provision of financial services and solutions using innovative technologies. These include Big Data, artificial intelligence, machine learning, robotics, blockchain, biometrics, cloud technologies, tokenization, and so on.
Fintech-as-a-Service is a platform that combines these tools and offers their comprehensive integration into the business processes of companies. At the same time, the technology provider that offers this service is 100% responsible for the development, maintenance, platform updates, compliance with security standards, and so on.
The Difference Between FaaS And a Set of Ready-made Tools
Sets of ready-made payment instruments are most often methods for acquiring, paying out, and issuing a bank card. Fintech as a service involves not just methods, but a ready-made bundle that solves a specific business problem.
A prime example of FaaS is a secure transaction, as it combines several methods – acquiring and payout. Money is withdrawn from one participant in a secure transaction, for example, from the buyer’s bank card, and the performer, a participant in this transaction, is paid for the service provided.
At the same time, the mode of checking certain conditions is immediately laid down, which is controlled and checked by the platform itself. For example, a platform for performers or the self-employed. This is what distinguishes a secure transaction from a simple bank transfer between participants. The mode provides for checking:
- the conditions for payment are met and money can be paid;
- the conditions are only partially met, so there is a need to pay part of the amount and return the rest;
- the conditions are not met at all, and, accordingly, the entire amount must be returned.
Obviously, compared to a normal payment between two participants, a simple acquiring or payout, a secure transaction is much more logically complex. It requires combining these tools and setting up certain rules. In FaaS mode, the site or platform receives a single bundle (there is no need to separately configure acquiring, payments, or any internal logic between these elements).
By sending a request through the API to such a method, the platform passes all the necessary conditions, and in the future, the system works automatically in accordance with all the rules. If you collect it from scratch on a separate payment fintech that does not give the target picture, this will require more costs. Sometimes it is impossible to make such a fintech service, because either you will have to make exorbitant commissions for participants, or those who provide this service do not have the information needed in full.
What to Choose: Your Own Fintech Solution Or FaaS?
The task is similar to the situation when there is a choice between in-house development and outsourcing or outstaffing. However, the difference is added by two more elements – the choice of partner and reputational and technological risks.
In addition to the question of the cost of personnel, primarily developers, and secondly experts in the field of finance and related issues of compliance, security, and regulation, the question arises of attracting the necessary partner who gives the license.
Fintech as a service often involves working with a licensed organization. This means that the task is not only to develop but also to partner with a specific financial institution. Finding a partner and the necessary financial conditions can make developing your own fintech software unrealistic or prohibitively expensive.
When you turn to a platform that provides Fintech-as-a-Service, it is already focused on you as a client and provides technological and financial conditions that are already potentially suitable for you.
Among the disadvantages, as in the case of purchasing some SaaS (Software-as-a-Service) or PaaS (Platform-as-a-Service) solutions, there may be inflexibility depending on the partner, as well as the degree of customization for your tasks.
You must trust your partner as yourself because you will bear reputational risks with your clients. If you are not a representative of a financial institution or do not have a financial license to provide services, you will still be forced to work with a partner and bear such risks for him.
At the same time, in the case of working with a conventional financial institution, there are high technological risks. As a rule, focusing on regulation and capital management, they lag behind in the implementation of technological services and experience a shortage of personnel in this area. From the point of view of the technological component, their fintech services are usually either basic, for example, payment methods or atomic financial solutions, or suffer from the backwardness of their approaches, limited bandwidth, or, in general, the instability of the technological service.
FaaS Is For Everyone
For small businesses, FaaS is an easy way to add fintech to your business without the cost of implementation and development. You take a ready-made service, for example, a chatbot shop with built-in payments, with which you can automate your sales through social networks, instant messengers, or, for example, Instagram. This allows you to monetize your audience at a high technological level, but at the same time not develop these solutions from scratch.
For large businesses, FaaS is an opportunity to additionally monetize their large audience through fintech services. This allows you to quickly start monetizing and selling financial services to your audience, rather than postponing it for several years in advance when the necessary scaling solution is created with a partner bank or your own bank.
Wrapping It Up
Fintech as a service opens the way for various companies to provide financial services using modern technologies. If you want to integrate fintech solutions into your business or develop your own fintech product, we recommend contacting Kindgeek fintech software development company.
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