How banking-as-a service (BaaS) is driving innovative financial services

Kwami Ahiabenu ll
4 min readFeb 2, 2022


Setting up a bank can be a long, expensive process with complex regulatory and compliance hurdles to overcome. However, with the emergence of Banking-as-a-Service (BaaS), an entity can provide banking services without batting an eyelid. With BaaS, non-banks including FinTech, and other entities such as professional bodies or schools can offer their own branded financial products such as debit, credit, or loyalty cards.

In other words, BaaS opens up banking to third parties supporting the evolution of new services and enabling greater financial transparency. BaaS is assuming great importance because it offers a great potential to expand banking services, disrupting the status quo and offering solutions that support exceptional banking consumer experience. Banking-as-a-Service is centered on the open banking model, which emphasizes consumer-driven financial service opportunities with more significant benefits accruing to consumers.

Banking-as-a-service (BaaS) can be described as an innovative banking mechanism that connects non-bank systems to banking processes so as to provide customers with a holistic experience. Almost all banking processes, including account opening, loan processing or payments, issuing of credit or debit cards, can all be integrated using BaaS. This integration allows third-parties to offer financial services to their customers through Application Processing Interface (APIs) driven platforms. The global BaaS, market was estimated to be USD 356.26 Billion in 2020 with a projected value of USD 2,299.26 Billion by 2028 at a Compound Annual Growth Rate (CAGR) of 26.33% from 2021 to 2028.

Follow @Graphicgh

Now the critical driver of BaaS is the notion of the ability of a non-bank entity to offer traditional banking services without needing to become a bank, this means, a non-bank entity can provide banking services without a banking license, or setting up a system for legal, compliance, security, anti-money laundering and other complex requirements needed in running a bank. The BaaS model provides the basis of a partnership between a bank and non-bank businesses thus heralding a new era where data, platform, and infrastructure sharing is the norm.

One can view BaaS as a modular structure with different layers securely glued together by an API-driven solution. In the BaaS model, a bank will enable third-party providers to connect to their banking infrastructure through API for a fee or under an agreed business arrangement, thereby opening their banking platform to support the creation of third party personalized branded banking services. The first layer in the BaaS model is the licensed bank, connected to the second layer, non-bank(brand), and the third layer, Fintech. The brand is the front end, where the customer experiences the service; it is the most visible part of the layer and serves as the service-based touchpoint where the end-user consumes the service.

The middle layer in the BaaS are Fintech actors who provide specialized financial solutions based on APIs to the brands; they serve as the interface between the brands and the banks by providing the services which make the whole system function. These Fintech actors can offer financial products and services packaged in a manner easy for consumption by the brands based on peculiar needs. The banks serve as the third layer and foundation on which BaaS is anchored. They hold the banking license, legal, regulatory, and capital to enable these end-users to access banking services through delivery channels such as mobile apps, websites, or other touchpoints.

BaaS is not without its challenges. Issues like cyber-attacks, security concerns, regulatory compliance, data control, privacy, setting up costs, poor partnership models, lack of interest by some banks in opening up their platforms, nonetheless it has countless benefits. For instance, brands increase customer engagement and create new revenue streams through the value addition BaaS offers. Also, the bank can expand its services without having to invest directly in touchpoints and costs associated with onboarding and servicing customers.

In conclusion, digital transformation is making it possible for banks to open up their platforms in a manner that was not conceivable a couple of years ago. Coupled with the rise of new actors on the block offering customer-centric banking services in direct competition to traditional banks BaaS, this is a welcome opportunity for the banks and Fintechs to connect brands and consumers. BaaS revolution is here to stay; banks which are progressive are able to take advantage of its offerings thereby positioning themselves to remain competitive, profitable, and sustainable so as to curb the phenomenon of the establishment of pure BaaS providers who are currently creating an entirely new banking sector.

Kwami Ahiabenu, II (Ph.D.) is a Technology Innovations Consultant
E-mail: kwami AT

First Published by Graphic