DEFINITION
Banking as a Service (BaaS)
Banking as a service or BaaS is a business model that allows non-banking companies to offer banking and other financial services. For example, by using APIs, Fintechs, e-commerce platforms and other third-party vendors can take advantage of licensed banks’ architecture to offer services such as account creation, payment processing, lending services, and so on.
Synonyms
Embedded banking
Acronyms
BaaS
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Synonyms
Embedded banking
Acronyms
BaaS
Examples
A ride-sharing app integrates BaaS as a core functionality. Thanks to this integration, drivers can connect their digital wallets to the ride-sharing app and check their earnings at any point. Riders can likewise use the app to pay for the ride seamlessly.
FAQ
How is BaaS different from traditional banking?
Traditional banking involves customers interacting directly with the bank for services such as making payments. BaaS on the other hand is embedded in a non-banking platform and while they use the bank’s infrastructure, the user never has to leave the third-party platform to make a payment, for example.
What are the advantages of BaaS for businesses?
BaaS enables businesses to offer financial services without the need for a banking license, reducing regulatory complexity and time to market. Furthermore, it makes for a seamless experience for the end user.
What are the risks of using BaaS?
While they don’t need a banking license, businesses using BaaS must still meet some regulatory requirements. Furthermore, both security and data protection are essential as sensitive customer data is processed through multiple systems.
Related Terms
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