The Banking as a Service (BaaS) Balancing Act: Regulation and Innovation

Banking-as-a-Service (BaaS) is a business model that enables non-bank entities to offer banking products and services by partnering with a licensed bank, which provides the necessary regulatory compliance and infrastructure. However, this model introduces several significant challenges and potential risks. It requires careful management of complex contractual arrangements, data privacy concerns, operational resilience, consumer protection protocols and anti-money laundering compliance. This session will examine how BaaS providers can ensure that non-bank customers fully understand key aspects such as deposit insurance, dispute resolution, and data security. It will also address the need to clearly define the roles and responsibilities of both bank and non-bank partners in terms of compliance, risk management, and supervision. Additionally, the session will explore strategies for creating a level playing field with traditional banks regarding regulatory requirements, fees, and access to payment systems, and how to strike a balance between fostering innovation and competition while maintaining financial stability and integrity.