Episode 108: BaaS in the Wild Nature

In the latest episode of Fintech Garden by DashDevs, Igor Tomych and Dumitru Condrea dive into one of the most debated topics in fintech: What’s the difference between Banking as a Service (BaaS), core banking, and embedded finance? These terms are often used interchangeably, but they serve very different functions.

This episode will clarify concepts such as banking as a service, core banking, and embedded finance solutions. Let’s review the key takeaways.

What is Banking as a Service?

Consider Banking as a Service as a convenient way to introduce financial products. Instead of building a bank from scratch (which requires licenses, regulatory approvals, and heavy infrastructure), companies can partner with BaaS providers to access pre-built banking infrastructure.

Who uses BaaS?

• Fintech startups launching digital banking products.
• SaaS platforms embedding financial tools into their offerings.
• Retailers and marketplaces offering branded financial services.

Banking as a service examples:

• A ride-hailing app offering driver wallets and instant payouts.
• A neobank launching debit cards without needing a banking license.
• An online marketplace providing embedded payment accounts for sellers.

Essentially, BaaS providers handle the banking complexity, so businesses can focus on customer experience and innovation.

Core Banking: The Engine Behind Every Bank

A core banking system is exactly what it sounds like—the heart of a financial institution. It processes transactions, manages accounts, and ensures regulatory compliance. Unlike BaaS, which is a service model, a core banking solution is a software product used by banks and financial institutions.

Who uses core banking platforms?

• Traditional banks and digital banks.
• Fintechs with their own banking licenses.
• Payment service providers (PSPs) needing transaction management.

What are core banking solutions used for?

• Handling deposits, loans, and account management.
• Processing real-time transactions.
• Ensuring compliance with financial regulations.

A core banking software is a tool banks own and operate, whereas BaaS lets companies access banking capabilities without being a bank.

Embedded Finance: Banking in Disguise

Embedded finance occurs when financial services are seamlessly integrated into non-financial platforms. Unlike BaaS, which provides the full banking stack, embedded finance is about convenience—it allows users to interact with financial products without leaving their favorite apps.

Who uses embedded finance?

• E-commerce platforms offering buy-now-pay-later (BNPL).
• Payroll platforms providing early wage access.
• Business software with built-in invoicing and payments.

Embedded finance examples:

• Shopify offering merchants business loans.
• Uber allowing drivers to cash out earnings instantly.
• Airlines providing travel insurance at checkout.

Embedded finance vs. BaaS? The difference is simple: embedded finance is about integrating financial services into an existing business model, while BaaS provides the entire banking infrastructure.

Why Does This Matter?

The financial landscape is shifting rapidly, and businesses looking to integrate banking services must make critical strategic decisions. With Banking as a Service (BaaS), core banking systems, and embedded finance solutions all playing different roles, companies need to choose the right model based on their growth goals, regulatory considerations, and customer needs.

Here’s why this matters now more than ever:

• Building your own core banking system means full control and long-term sustainability—but it comes with high upfront costs, regulatory complexity, and a long development timeline. This is a path typically chosen by licensed banks or large financial institutions looking to modernize their infrastructure
• Using a BaaS provider allows fintech startups and non-financial companies to launch financial products faster, reduce regulatory burdens, and scale more efficiently. This approach is ideal for businesses that want to offer banking services without becoming a bank.
• Embedding finance into an existing business helps non-financial companies like e-commerce platforms, payroll services, and SaaS providers integrate payments, lending, or insurance without major operational shifts. This model enhances customer experience and revenue generation by keeping financial interactions seamless.

The banking-as-a-service market is expected to reach $20B by 2030, highlighting the increasing demand for scalable, efficient, and regulation-ready financial infrastructure. Whether you are a fintech innovator, a SaaS leader, or a company exploring financial services, understanding these distinctions is crucial for making the right strategic move.

Want to hear real-world insights, expert opinions, and practical examples? In Episode 108 of Fintech Garden Podcast by DashDevs, we break it all down—giving you the knowledge you need to navigate this rapidly evolving landscape. Tune in now!