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

4 min readOct 6, 2023

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.

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

Access to the full comparison table at BaaS vs. Platform Banking vs. Open Banking: What are the Differences?

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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. For a better start, consult with fintech experts and get a clear plan for your project execution.

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