Once based on phone calls, paper contracts, and in-person consultations, the brokerage industry, like many others, has undergone a dramatic transformation over the last two decades. The rise of digital platforms, apps, and AI accelerated this process even further, and today, everybody can and wants to be an investor. This revolution of financial markets, going hand in hand with the evolution of modern banking, is not only about convenience, but also about inclusion.
New fintech companies and start-ups, even those not financially inclined, look to offer their clients investment possibilities directly on their platforms. But building all the structure and tools necessary for offering such services is not a walk in the park, it requires investing a lot of time and resources, which not every rising FinTech actor has. That’s where Brokerage as a Service comes into action. Just like “Banking as a Service”, this model has instantly gained popularity, and it’s hard to overestimate its potential. To put it simply, BaaS allows companies to integrate investing functions into their platforms without the need to build a complex brokerage infrastructure themselves. This way, you can turn virtually any app into an investment platform.
Massive Market Demand
Investing is no longer reserved only for the Wall Street “Wolves” who act as the gatekeepers of all the essential tools and real-time data needed for investing. The rise of new-fangled commission-free investing platforms, global access to financial education, and the investing boom that came with the pandemic created a new generation of retail investors. This new class of consumers expects their financial platforms to be multifunctional, and they want to invest directly from their budgeting or banking apps, which have to keep up with the demand if they want to stay relevant and keep making a profit. BaaS seems like a no-brainer for those who want to make the necessary updates quickly.
Lowering the Entry Barriers
Building a brokerage firm no longer requires immense capital, years of infrastructure development, and tons of regulatory licences. Brokerage as a Service tore those barriers down. Today, a new bank or any fintech startup can launch investing features within months, simply by hiring a BaaS provider and letting them handle the custody, trade execution, compliance, and clearing. This has significantly lowered the threshold for competition and innovation in the investing area, and we can see more and more actors entering from sectors previously not connected with finances, including wellness apps, telecom services, or gaming platforms.
Revenue Opportunities
Brokerage features offer more than just user engagement. They can be a direct revenue stream. Platforms can now monetize through transaction fees, interest on uninvested cash, or revenue sharing with their BaaS provider. These new investment tools also boost LTV (lifetime value) and user stickiness, which is another term for user retention. This can turn any given financial product from a one-time service into a long-term relationship.
Global Scalability
Even though it was born in the US, Brokerage as a Service spread across the globe like a wildfire, democratizing the investing world. In areas like Africa, Asia, and Latin America, where traditional brokerage access has been limited, companies like Nigerian Bamboo, Indian Vested are now using BaaS providers to bring global equities to users who were previously shut out of the market.
Considerations and Challenges
Looking ahead, it’s easy to tell that Brokerage as a service is bound to grow explosively, but despite all its promises and shiny-looking future, BaaS is not without its complexities. One especially challenging subject is how varied the legal landscape is in each country and how difficult it is to navigate it for a BaaS provider without exposing any of their clients, or themselves, to legal risks. Security and data privacy are also key, and any company that wants to enter into the business must take the highest measures and invest in a robust cybersecurity infrastructure to avoid losing their clients’ trust.
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