Paper Number

ICIS2025-2570

Paper Type

Short

Abstract

Open Banking (OB) and financial technology (FinTech) shape a new direction for the financial services industry, allowing banks and partnering firms to collaborate in delivering innovative products and services. This study examines how banks’ Banking-as-a-Service (BaaS) affects bank performance, with susceptibility to regulatory risk as a mediating mechanism. Specifically, we focus on whether the two key components in BaaS implementation, the number of supported businesses and the number of FinTech partnerships, increase regulatory risk susceptibility, and whether regulatory risk susceptibility shapes performance outcomes. Through the lens of Transaction Cost Economics (TCE), our findings contribute to enhancing our understanding of how banks need to balance between strategic and regulatory APIs to provide robust BaaS foundations and align their core banking services to FinTech partners to minimize regulatory risks and achieve performance. This study also provides insights for bank and FinTech practitioners to align BaaS with strategic goals.

Comments

22-FinTech

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Dec 14th, 12:00 AM

Banking-as-a-Service: Tradeoffs in Regulatory Risk and Bank Performance

Open Banking (OB) and financial technology (FinTech) shape a new direction for the financial services industry, allowing banks and partnering firms to collaborate in delivering innovative products and services. This study examines how banks’ Banking-as-a-Service (BaaS) affects bank performance, with susceptibility to regulatory risk as a mediating mechanism. Specifically, we focus on whether the two key components in BaaS implementation, the number of supported businesses and the number of FinTech partnerships, increase regulatory risk susceptibility, and whether regulatory risk susceptibility shapes performance outcomes. Through the lens of Transaction Cost Economics (TCE), our findings contribute to enhancing our understanding of how banks need to balance between strategic and regulatory APIs to provide robust BaaS foundations and align their core banking services to FinTech partners to minimize regulatory risks and achieve performance. This study also provides insights for bank and FinTech practitioners to align BaaS with strategic goals.

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