BaaS: The future of Banking

If you’re in the Fintech industry, you’ve probably already heard the term ‘Banking as a Service’ thrown around, but what is it?

Simply put, it’s a disruptive technology that is changing the face of the banking industry by allowing non-banking entities to offer financial services.

Let’s take a look at what BaaS is, how it works, and some of its use cases.

What exactly is Banking as a Service?

Banking as a Service (BaaS) is a digital banking model which eliminates the need for companies to obtain a banking licence. By partnering with licensed banks, non-bank businesses can provide their customers with access to a wide range of banking and financial services.

According to Deloitte, 42% of customers have used a Buy Now, Pay Later service, while there is a two-fold increase in the return on assets for BaaS offerings.

How does Banking as a Service work?

Application Programming Interfaces (APIs) are the cornerstone of BaaS, allowing non-bank businesses to access the banking infrastructure and services of licensed banks.

For example, if you start a pre-packaged meal delivery service, incorporating BaaS will allow you to easily collect regular payments from clients for revolving orders, and apply for a loan all from the same account. It eliminates the hassle of opening multiple bank accounts, filling in endless paperwork, and waiting for approval for a business banking account.

Is BaaS considered a form of embedded finance?

Yes, BaaS is considered a form of embedded finance. Embedded finance refers to the integration of financial services into non-financial products or services.

Embedded finance consists of financial services such as payment processing, Automated Clearing House (ACH) access, or wire transfers that are integrated into the software.

What about Software as a Service?

Software as a Service (SaaS) is a software delivery model in which a software application is hosted by a third-party provider and made available to customers over the internet.

SaaS is similar to BaaS in that it allows businesses to access a service without having to build and maintain it themselves. However, SaaS refers specifically to software, whereas BaaS refers to banking services.

Banking business models

As described above, BaaS is a model in which licensed banks – both traditional and challenger banks – integrate their digital banking services directly into the products of other non-bank businesses.

Another form of digital banking model, often confused with BaaS, is open banking.

Is open banking the same as BaaS?

No, open banking is distinct from BaaS. Open banking is a regulatory framework that gives customers the ability to securely share their banking data with third-party financial service providers such as fintechs.

This provides access to a larger range of financial services. In contrast, BaaS is an integration of banking services into the products of non-bank businesses.

BaaS vs platform banking

Platform banking involves a bank acting as a platform to bring customers access to a variety of third-party financial services. This includes not only traditional banking products but also non-banking services like insurance, investments, and payments.

While BaaS is similar to platform banking it is restricted to integrating banking services specifically, while platform banking may include a broader assortment of financial solutions.

The BaaS value chain

As opposed to pre-BaaS days whereby traditional banks owned the entire banking supply chain, today’s BaaS players are enabling new, specialised propositions and are helping fintechs bring products to market faster.

In the BaaS model, there are several key players involved in the value chain:


BaaS providers are the licensed banks that offer their banking services to non-bank businesses through APIs. These can be traditional banks or challenger banks.


BaaS aggregators are companies that bring together the services of multiple BaaS providers and offer them to non-bank businesses as a single solution.

Distributor aggregators

Distributor aggregators are companies that work with BaaS aggregators to distribute the BaaS offering to a wide range of non-bank businesses. This is one of the areas we specialise in at Integrated Finance.


Distributors are companies that offer BaaS services to their customers on behalf of BaaS providers or aggregators.

As opposed to the traditional banking model, where banks own the entire banking supply chain, the BaaS model allows for specialised propositions and helps fintechs bring products to market faster.

Legacy banking institutions can leverage their existing infrastructure and expertise to take advantage of the banking-as-a-service (BaaS) model and turn an encroaching technology-based threat into a business opportunity.

BaaS market outlook

The BaaS market is expected to see significant growth in the coming years. According to a report from Deloitte, the global BaaS market is expected to reach $12.7 billion in revenue by 2024, growing at a CAGR of 45.7% from 2019 to 2024. The report also predicts that the Asia-Pacific region will see the highest growth rate, with a CAGR of 49.6%.

BaaS benefits to Fintech businesses

BaaS offers several key benefits to Fintech businesses, namely:

  • Allows Fintechs to offer a range of financial services to their customers without having to obtain a banking licence.
  • Enables Fintechs to bring products to market faster.
  • Allows Fintechs to focus on their core competencies and leave the management of banking infrastructure to the licensed banks.
  • Can generate additional revenue streams for Fintechs.

Getting started with BaaS

BaaS is here to stay and, as we've gone over in this article, it's changing the way businesses offer new products to their customers.

If you are a business looking to leverage the power of BaaS, contact us. Our team are experts in the digital banking industry and can help you go from contract to product launch in record time.

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