Glossary
BaaS (Banking-as-a-Service)
Banking-as-a-Service is a model in which licensed financial institutions expose their regulated banking infrastructure to non-bank businesses through APIs. This allows those businesses to embed banking products (accounts, payments, cards, lending) directly into their own platforms and customer experiences. BaaS is the infrastructure layer that makes it possible to offer virtual IBANs, payment accounts, and embedded financial services without holding a full banking licence.
What It Is
Traditionally, offering banking services required a banking licence, a costly, years-long process involving regulatory approval, capital requirements, and ongoing compliance obligations. BaaS changes this by separating the banking infrastructure (the licensed, regulated layer) from the customer-facing product (the interface and experience the end user sees).
A BaaS provider (typically a regulated bank or licensed e-money institution) handles the compliance, regulatory capital, risk management, and core banking operations. The platform using BaaS controls the user interface, product design, and customer relationships. The result is banking functionality delivered under the platform’s brand, powered by regulated infrastructure underneath.
This model has enabled an entire generation of fintech platforms to offer financial services that previously required building or acquiring a bank.
The BaaS Stack
Banking licence and regulation: BaaS provider (licensed bank or EMI); licence, capital requirements, FCA/BaFin authorisation.
Core banking infrastructure: BaaS provider; ledgers, payment rails, clearing, settlement.
API layer: BaaS provider (consumed by platform); account creation APIs, payment APIs, card issuance APIs.
Product design and UX: platform; interface, user flows, dashboard.
Customer relationship: platform; onboarding, KYC, customer support.
Brand: platform; white-label presentation.
What BaaS Enables
BaaS allows platforms to offer a suite of embedded financial services natively within their product:
Virtual IBANs: Every user on the platform can be issued a dedicated IBAN (a real, functional bank account number) used for receiving payments, holding balances, and executing transfers. Powered by BaaS infrastructure, these IBANs connect to SEPA and SWIFT payment rails without the platform needing its own banking licence.