Banking as a Service vs Banking as a Platform vs Open Banking: Knowing the difference

Updated: October, 2026

Banking as a Service (BaaS), Banking as a Platform (BaaP), and Open Banking use APIs to provide better, faster and more secure financial services for customers. They’re not in competition, but work together to provide better digital banking and online financial experiences.

We’re going to explain what BaaS, BaaP and Open Banking systems are, how they work, and their limitations. We’ll compare them, so you can see what’s included and what’s not, and bring these to life with some real use cases.

What is Banking as a Service (BaaS)?

Banking as a Service (BaaS) is a solution that enables non-banks to embed finance products into their applications through APIs. Financial products based on BaaS can include accounts, payments, and cards.

You can think about BaaS as a white label service, with a regulated banking institution making its license and infrastructure available to (typically unregulated) third parties.

BaaS makes it simpler, cheaper and easier for third parties, including fintechs, digital banks, and other non-bank businesses to build new products on solid foundations. 

Development times of new products can take weeks, with full implementation timeframes as short as a few months. Previously it could have taken a year or more for banks to do this.

Read on: How Can APIs Contribute to Your Business Success?

Who benefits from BaaS?

BaaS is breaking down barriers, making it easier, cheaper and faster for new entrants to offer financial services. Working with a regulated provider means they don’t need to enter into the lengthy and costly process of acquiring a financial services license.

The applications of BaaS are huge. BaaS is popular among early-stage fintech startups, or non-financial businesses that are keen to integrate financial services with minimum development. 

The company maintains the customer relationship, with no disruption to the user experience. Behind the scenes, the BaaS platform communicates with the ledger and sends an instruction to the licensed bank provider. The money moves on the payment rail, with the system updated through a webhook. 

The simplicity of an API-based BaaS solution enables companies of any size and in any sector to offer loans, lines of credit, or financing inside their own websites or apps. It has the potential to transform financial services.

If you’re a consumer tech company wanting to add financial services to your offer, BaaS is the ready-made solution.

Uber: An example of BaaS in action

Uber has transformed travel and continues to innovate, using BaaS as the basis for a range of new services. New functionality like Uber’s Cash Wallet, auto top up functionality, and the ability for customers to use multiple payment methods are innovations powered by BaaS systems.

Drivers, too, are benefiting from BaaS, receiving same-day payments from the system and even being able to access cash advances if required. The Uber Pro Card in the UK is an illustration of how Uber is using BaaS to develop localized solutions. 

BaaS is enabling Uber to innovate quickly, delivering new solutions for customers and drivers.

What are the limitations of BaaS solutions?

BaaS solutions are built on a deep relationship between the customer and the provider, with the potential for vendor lock-in. Because of the deep integration into business delivery, customers must select a BaaS partner they can trust and rely on for the long term.

As with any financial product or solution, there are initial and ongoing regulatory requirements that must be fulfilled that can be resource-intensive and costly.

BaaS is a partnership model and the service must be paid for, which can impact profit. However, the costs and risks must be weighed against the benefits – including the speed to innovate, simplicity of integration, and license requirements.

What should you look for in a BaaS provider?

The BaaS solutions marketplace is saturated, and potential buyers must choose wisely to ensure the provider can deliver the quality, interoperability, and scalability required.

So, what should you look for in a BaaS provider?

1. Scalability: You’ll want confidence that the platform can effortlessly handle increasing transaction volumes and user growth without impacting performance.
2. Multi-currency management: If you plan to expand internationally, any system must enable the seamless processing, settlement, and holding of foreign currencies.
3. Compliance configurability: All regulatory workflows and automated checks must be tailored to regional legal requirements to ensure compliance.
4. Modularity: You want to be in control of the features and functionality you use, so choose a solution with flexible, plug-and-play components.
5. Deployment model: Understand whether the provider operates via a public cloud, private cloud, or hybrid architecture and ensure it’s suitable for your organization and potential applications.

Implementing a BaaS solution involves more than technical knowledge; you’ll want to work with a partner that understands your organization and has experience with similar deployments.

As we’ve explained above, BaaS solutions involve two partners (the provider and the customer) effectively integrating their businesses together.

What infrastructure does Banking as a Service require?

A Banking as a Service solution has four core infrastructure layers that work together:

1. Core banking layer: This is the central ledger managing accounts, balances, transactions, and real-time transaction reconciliation.
2. API layer: APIs support safe and secure data flow and communication between the core ledger, any third-party applications, and financial networks.
3. License partner: The partner provides the essential banking or e-money license and regulatory framework that enables the customer to legally offer financial products.
4. KYC and compliance layer: This layer embeds all essential regulatory controls, anti-money laundering (AML) checks, and customer verification. It’s about ensuring end users are safe and that all rules and regulations are followed to the letter.

What is Banking as a Platform (BaaP)?

Banking as a Platform (BaaP) describes the process of a bank using APIs to open up its infrastructure to partners, including fintechs, third-party developers and other service providers.

Banking as a Platform is the inverse of Banking as a Service, and involves the bank integrating third party services into its own system using APIs. This enables the bank to rapidly grow, offering new services or expanding into new markets. Services are built in the cloud and operate on open architectures, giving users a seamless experience.

Crucially, the bank can achieve all this while still “owning” the customer relationship.

As a result, banks can innovate faster than ever before. As well as accelerating expansion, banks can become faster to react to changes in consumer behavior and emerging new trends.

Who benefits from BaaP?

In an age of rapid innovation and the emergence of neobanks, traditional incumbents have been affected by inertia. BaaP can help them break free, enabling them to be more agile, developing new financial products that connect with customers. 

By incorporating third parties into their ecosystem, banks can save money on development and support, freeing up internal resources to focus on core activities.

Third-party providers and developers are able to develop new, customer-focused products that can generate a profit. Fintechs are able to piggyback on the existing infrastructure, developing new ideas rapidly and with faster results than in-house teams.

Most importantly, banking customers receive better, more personalized services from their banking providers that can increase loyalty. Using BaaP to remove friction from common banking interactions – like checking a pension account or credit card balance – is a core part of many modern online banking apps.

What are the limitations of BaaP?

Banks that rely on legacy infrastructure may not be able to incorporate the APIs required for BaaP. Instead of rapid implementation, banks can find incorporating APIs into existing systems a costly and time consuming process. Even if integration is achieved, banks must ensure that third-party traffic doesn’t interfere with core banking functionality.

BaaP involves banks developing relationships with third parties that can expose the organization to risk. In an increasingly risky environment, banks are understandably worried about increasing their attack surface, limiting the potential for API integrations. This challenge is amplified for banks that work in multiple countries.

More fundamentally, the investment required to enable BaaP is significant. While the customer experience may be improved, it may take years for the bank to recoup its investment.

An example of BaaP

Starling Bank is a successful example of a modern bank using BaaP to expand its service offer. The online bank has opened up its infrastructure, enabling third-party platforms like accounting provider Xero to automatically sync transactions, saving business owners time.

Personal banking customers can take advantage of the benefits of BaaP, using third-party services like PensionBee’s pension tracker to stay on top of savings.

BaaP is enabling Starling to incorporate new, innovative and genuinely useful new services in its platform, increasing customer satisfaction and powering growth.

How a modern core supports both BaaS and BaaP

A modern, cloud-native core banking platform provides the modularity, scalability, and API-first connectivity required for BaaS and BaaP. There are four elements:

1. API-first architecture: APIs facilitate real-time data flows, enabling smooth integration across accounts, payments, lending, and cards. An API-first approach built on open foundations is fundamental to product innovation for both embedded finance and third-party partner applications.
2. Operate solutions independently: Operators can run new BaaS or BaaP offerings alongside legacy infrastructure without any operational disruption or customer impact. This can be achieved by creating separate, dedicated and isolated environments.
3. Easy-to-implement integrations: Pre-built integrations enable simple connections to third-party tools, including KYC, AML, card processors, and payment gateways. Integrations simplify development, accelerating innovation and cutting time to market for new products, services, and solutions.
4. Scalability: A modern core banking system is stable, supporting real-time transaction processing with high uptime and low latency. It’s a solid platform on which to scale, providing reliable performance as demand increases.

What is Open Banking?

Open banking is a regulatory framework that lets customers securely share their bank data with authorized third parties, or let those parties initiate payments, through APIs.

Like BaaS, open banking uses APIs to communicate with other banks and financial providers, but the purpose is different. BaaS enables firms to offer banking products, while open banking gives access to data.

The shift to open banking has been made possible by positive changes to regulation across the world. For example, changes to PSD2 in Europe are enabling the release and sharing of data by banks in a secure, standardized form.

Benefits of open banking

Open banking provides a seamless, safer, and much simpler experience for customers. Instead of having to switch between platforms and apps, they can switch between providers.

Customers can use new options like “Pay by bank” and be transferred directly to their account. A new generation of apps can use Variable Recurring Payments (VRPs) to access variable amounts of money, accruing them in separate pots. Open banking enables customers to use single apps to see all financial pots, simplifying financial management.

Open banking gives providers with more data, developing more sophisticated and accurate customer profiles. These insights can help to improve the overall customer experience. It also means banks can target customers with relevant products and services, such as loans, with a potentially higher chance of success.

An example of open banking

Payment provider Klarna is using open banking solutions to power its rapid growth. At the checkout, customers can select payment by bank and be carried through to their provider, removing the need to manually enter credit card details.

The payment preference is stored, enabling one-click checkout. It’s faster for the customer and better for the business, with 9 million users choosing Klarna every day.

BaaS vs BaaP vs Open Banking compared

Feature	Banking as a Service (BaaS)	Banking as a Platform (BaaP)	Open Banking
Provider	Licensed banks	Banks who open their APIs to third-parties	Banks and other account providers
Users	Fintechs, retailers and non-banks who want to offer financial services	Fintechs and developers who want to build on the bank ecosystem	Regulated third-party providers (TPPs) and customers
Use cases	Branded accounts, loans and lending, embedded finance	Partner apps accessible through the banking infrastructure, including budgeting, insurance, and accounting	Account aggregators, budgeting and credit checking apps, account switching and payment initiation
Information flow:	Outward: Bank to the Third-Party	Inward: Third-Party to Bank	Data sharing: Bank to an authorized Third-Party
What’s shared?	License & infrastructure	Access to infrastructure for development	Data
Primary purpose	Creating new, branded financial products	Enhancing the bank’s own products	Sharing data and enabling faster payments
Who owns the accounts?	Owned by the brand, issued by the bank	Owned by the bank	Customer’s original bank
Regulation required	Banking licenses, KYC/AML compliance	Internal risk & vendor management	Data privacy & consent (e.g., PSD2 / GDPR)

Putting customers first: BaaS, BaaP & Open Banking

BaaS, BaaP, and Open Banking aren’t in competition. As we’ve explained, they’re different ways that banks, fintechs, and third parties can collaborate to improve the customer experience.

New technologies and approaches like BaaS, BaaP, and Open Banking are making it easier than ever to innovate in financial services. Organizations and leaders need to understand the potential for new technologies and solutions, and how these can be applied to improve the customer experience.

Start here: A European CIO’s Guide to Progressive Core Modernization.