Customer journeys are quickly moving from a product-centric view (where banks have historically focused) to a contextual view that emphasizes solutions at the point of need. New providers are popping up with solutions tailored to support these journeys through new models such as embedded finance and Banking-as-a-Service (BaaS). Celent defines BaaS as “the producer/supplier of products and capabilities, enabling third parties to launch a branded finance experience.” BaaS breaks down the banking stack into three buckets: the customer experience, products/functionality, and the regulatory license. It demarcates customer engagement from infrastructure, allowing consumers of BaaS offerings to focus on building differentiation versus commodity infrastructure. The BaaS layers can all come from the same supplier, also known as a full-stack provider, or they can be mixed and matched from different parties that may specialize in a slice of the stack (e.g., issuing credit cards).
This solution brief discusses Railsbank and the evolution of its product offering. Celent found the Railsbank full-stack BaaS platform to be a great example of where the industry is headed and a worthwhile company to explore in more detail. While currently it doesn’t sell directly to banks, Railsbank represents a new generation of fintech affecting the delivery of financial services. These infrastructure providers are lowering the barriers to entry for banking, revolutionizing the speed and economics of competition. Celent believes banks should understand the threats as well as opportunities this presents.
Railsbank was founded in 2016 in the UK by Nigel Verdon and Clive Mitchell as an API-led BaaS platform, which seeks to give nonbanks and other regulated or unregulated entities access to traditional financial services capabilities. Its total funding amounts to $51.4 million across three rounds of fundraising. Its most recent round raised $37 million in equity funding for international expansion. The company works primarily with fintech and nonbanks to offer access to wholesale banking services via its API platform and e-money license registered in the UK.