What is Banking as a Service (BAAS)?

Banking as a Service (BaaS) is a term that refers to the provision of banking services through digital channels by licensed financial institutions to non-banking businesses. BaaS enables these businesses to offer banking services to their customers without the need for them to obtain a bank license.

BaaS operates through the use of APIs, which allow non-banking businesses to integrate with financial institutions and offer digital banking services to their customers. A growing market in the field of employee expense cards is reliant on BaaS to deliver its products.

An example of BaaS is a scenario where a manager of an airline company wants to offer banking services to their customers. Instead of obtaining a bank license, the airline company can partner with a licensed financial institution to offer these services through the integration of APIs. This allows the airline company to offer digital banking services to their customers without the need to go through the process of obtaining a bank license.

Simplified Example

Banking as a Service (BaaS) can be compared to renting a tool instead of buying it. Just as someone might rent a power tool for a specific project instead of buying it, a company might use BaaS to access the services of a bank without actually becoming a bank itself. Just as a person who rents a power tool is able to use it for a specific job without having to worry about storage, maintenance, or repairs, a company using BaaS can access the services of a bank, such as payment processing or loan disbursement, without having to worry about the costs and complexities of building and maintaining a full-fledged banking operation. Just as a rental tool can be more cost-effective and flexible than owning one, BaaS can be a more cost-effective and flexible solution for companies that need access to banking services. In short, BaaS is like renting a tool from a bank, allowing companies to access the services they need without the costs and complexities of building and maintaining a full-fledged banking operation.

History of the Term "Banking-as-a-Service (BAAS)"

The concept of Banking as a Service (BaaS) predates the term itself, with early manifestations emerging in the late 1990s and early 2000s as banks offered limited banking services through APIs to third-party businesses. The term "BaaS" gained prominence around 2010-2012, initially surfacing in industry reports and discussions within the realm of financial technology (FinTech). Early adoption of the term is often attributed to financial technology companies and industry analysts who recognized its transformative potential in reshaping the delivery of financial services. Pioneering FinTech companies, such as Stripe and Plaid, contributed to popularizing the term by developing platforms that seamlessly integrated banking services into non-financial applications. Additionally, industry analysts and researchers from organizations like McKinsey & Company and Gartner Inc. played a role in raising awareness and understanding of BaaS, while major banks, acknowledging its potential, joined the movement, adopting and promoting the concept and thereby solidifying the term within the financial services landscape.


Businesses which operate on the BAAS model, are largely focusing on only one to two stages of the value chain opposed to traditional banks who own the entire value chain. 

Some fintech's such as MTN Momo are pushing to take advantage of the revenue opportunities presented by the Banking as a Service model.

Tech-savvy legacy banks can now fend off the encroaching threat of fintechs by moving into the BaaS space to share their data and infrastructure while still controlling the services that are made available to these third parties.

  • Application Programming Interface: A set of programming instructions and standards for accessing a web-based software application or web tool.

  • Unbanked: Used to describe individuals, businesses, and organizations that are not associated with the traditional banking system.