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    BaaS vs. Platform Banking vs. Open Banking: What are the Differences?

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    Since the emergence of big tech & fintech companies, who have provided innovative and seamless ways to access financial services, incumbent banks no longer monopolize the financial services sector. Therefore, banks should consider venturing into a new frontier: adopting an open and marketplace-oriented strategy to innovate their offerings and adapt to a digital-first world. The report from Frollo in 2023 indicates that more than 110 banks and financial institutions are sharing data for more than 30 different financial products. 

    There are three key concepts that have emerged at the forefront of this evolution: BaaS (Banking as a Service), Platform Banking, and Open Banking. In this article, we’re going to delve into the concepts and implications and witness how they are connected together in the real world.

    What is BaaS (Banking as a Service)?

    Banking as a Service (BaaS) involves delivering banking infrastructure and services to third-party distributors. By integrating non-banking enterprises with established financial infrastructure, BaaS empowers these entities to provide innovative, specialized propositions and accelerate the time to market, all without obtaining a banking license. 

    Under the BaaS model, the bank provides non-banks seamless access to its core banking functions, including account management, payments processing, compliance, and often access to regulatory licenses and systems. 

    What is Open Banking?

    The current payment system is quite complicated. Just imagine that you buy a bicycle on Amazon using Visa credit card issued by the bank, a streamlined process involving multiple parties, including the bank issuing you the card and Amazon to ensure a successful completion of transactions. There will be several steps that need to be verified:

    • Payment entry at Amazon’s checkout
    • Data encryption
    • Card authorization
    • Bank authorization, checking, and response
    • Amazon response
    • Transaction settlement and records

    By opening up banks’ data, Open Banking makes it possible to pay directly from a bank account without various middlemen that may charge their services, reducing response time and minimizing risks that may occur through different steps. 

    Read more: How Open Banking APIs are Revolutionizing the Australian Financial Services Industry

    What is Platform Banking (Banking as a Platform)?

    In the context of digital transformation and the evolution of banking services, the term Platform banking has emerged in recent years. Platform banking is a digital marketplace owned and managed by a bank or other third party, offering a range of both banking and non-banking services. 

    According to Deloitte, platform banking extends beyond retail financial services; it can also be implemented in institutional settings, catering to corporate customers and buy-side firms across various industries.

    Comparing Between BaaS, Open Banking, and Platform Banking



    (Banking as a Service) 

    Open Banking

    Platform Banking

    (Banking as a Platform)


    A system where non-banks use established financial infrastructure to deliver bank services to users.

    Enable companies to offer full-fledged banking products through their interfaces.

    A banking practice that provides third-party access to financial data through open-source APIs.

    Grant access to clients' data (with their consent) without transferring banking functions.

    A model where a bank owns a digital platform that can integrate with various fintech services.

    Primary Goal

    Empower non-financial companies to provide banking-like services without the regulatory burden and overhead expenses.

    Foster competition and innovation in the BFSI industry, offering users more choice and control over their financial data.

    Offer a broader array of services available to customers by integrating third-party fintech services into one single bank's platform


    • Increase innovation and collaboration by promoting the development of new and innovative financial products and services. 
    • Expand customer base: banks can reach new markets and demographics via partnerships with businesses in various industries.
    • Reduce time and cost associated with obtaining a banking license and building a banking infrastructure.
    • For banks: enhance collaboration between institutions and improve user experience.
    • For third parties: create new sources of financing, contribute to higher conversion rates, and simplify the credit risk evaluation processes.
    • For users: they can control financial data, manage their finances more effectively, and experience convenient and personalized services.
    • Allow banks to offer a wider range of services by integrating external fintech services, providing a one-stop solution for customers.
    • Strengthen user relationships since the bank remains the primary point of contact.
    • Improve user experience as they can access and manage their accounts without the need to navigate multiple platforms or interfaces. 

    Business Approach

    The BaaS providers focus on backend banking infrastructure and processes, while third-party corporations handle customer-facing interfaces and services.

    The bank shares customer data via APIs, which third-party providers use to offer new services.

    The bank oversees both the backend operations and the frontend user experience, harnessing external fintech advancements.

    How APIs Work

    By utilising APIs, third-party corporations can access banking services. 

    For example: a fintech business could utilise APIs from a BaaS provider to offer users the ability to open accounts or make payments.

    Banks provide APIs that allow third parties to access customer financial data and build new services. 

    For example: through APIs, an insurance app can access larger pools of data, which permits them to provide more intelligent risk evaluation and reduced underwriting times to their customers.

    In this model, the third parties develop services on top of the core banking platform and share the APIs with the bank. Then, the bank uses APIs to integrate external fintech services, from loan origination software to risk management tools, into its platform.

    For example: a bank integrates a chatbot into its app to improve its investment services. The chatbot is created by an external fintech company yet offered directly through the bank. 

    Real-Life Cases

    • Westpac partnered with 10x Banking to launch a BaaS offering. The platform allows the bank to offer digital banking products through a network of partners and deliver new services in and beyond banking. This brings financial services right to where the customer is (Westpac, 2022).
    • The National Australia Bank (NAB) streamlined its internal APIs through a unified platform, allowing internal developer teams to independently publish or utilise APIs without central team involvement.
    • Up, a digital bank that operates under Bendigo and Adelaide Bank’s ADI, leverages open banking APIs to offer customers real-time transaction information, automated categorisation of expenses, and personalised spending insights.
    • Wells Fargo, a leading US bank, introduced a “one-stop-shop” digital banking platform for its corporate investment and commercial banking clients. This new offering provides enhanced features to drive a more personalised experience through AI/ML (Wells Fargo, 2022).

    Enroll In Fintech Development

    The prevailing trends in the fintech industry present significant opportunities for businesses of all sizes. With the assistance of BaaS and open banking, companies can have the capability to implement any idea that requires using specific finance data and tools. Conversely, platform banking empowers banks to harness the most recent fintech advancements, enhancing the functionality of their digital products.

    Among all three concepts, platform banking is on the rise, with the global revenue from Banking-as-a-Platform (BaaP) services anticipated to rise by 1,125%, from $4billion in 2023 to $49billion in 2028, according to The Fintech Times. Although the transition to a new business model enabled by platform banking is not anticipated to be easy, the payoff could be significant. 

    Since the world of platform-banking may arrive sooner than many expect. Being a first mover can offer substantial advantages. Successfully adopting platform banking requires substantial reengineering of current core banking applications architecture and infrastructure as well. Learn more with our fintech experts and discover the best strategy for your business.