Open Banking, BaaS (banking as a service), and embedded finance are related concepts, but they are not the same thing. Here is a look at definitions for each of them, how they are interrelated, and why open banking provides the digital foundation for the other two models.
With Amplify Open Banking, Axway provides financial institutions (FIs) with a path to execute on all or any of these strategies.
What is Open Banking?
Embedded finance is the consumer-facing outcome of BaaS: financial services delivered inside a non-financial product where the customer already is. Examples include buy-now-pay-later at checkout, embedded insurance offered inside a car-rental flow, payroll-advance inside a workforce app, and accounting-software-issued business credit cards. Embedded finance shifts the point of distribution from bank branches and bank apps into the everyday digital products customers already use.
Open banking is a regulated practice that lets bank customers share their account data and initiate payments through licensed third-party providers using secure, standardized APIs. The bank stays the regulated institution holding the account; the third party builds the user-facing experience (budgeting app, accounting tool, account-to-account payment). Open banking is the regulatory and technical foundation that makes both banking as a service (BaaS) and embedded finance possible at scale.
Open Banking is a regulatory (or market-driven, depending on the region) framework that enables consumers to share their financial data securely with third-party providers. It also aims to give consumers more control and ownership of their data, allowing them to move between financial service providers more easily.
Dive deeper: Here’s an “Open Banking” definition we all can understand.
Open banking enables financial institutions to provide customers with more personalized and innovative services by leveraging their data. For example, thanks to open banking APIs, a consumer could connect their bank account to a budgeting app or a robo-advisor, allowing the app to analyze their spending habits and provide personalized financial advice with the customer’s explicit consent.
By adopting open banking, financial institutions will also be able to move away from the unsecure and unstable ‘screen scraping’ method that is still widely used by account aggregators. These practices will make it much more difficult to comply with the U.S. CFPB 1033 regulation that will be phased in starting next year. Meanwhile, the Canadian government hopes to render screen scraping obsolete with its own open banking framework.
Latest updates: Section 1033 of the Dodd-Frank Act became law in January 2025, but recent White House actions against the CFPB have led to some uncertainty over the agency’s future. Get the facts here.
What’s more, banks and financial institutions stand to benefit from opening up their data as APIs because breaking down those walls in the financial services arena allows a two-way flow of information , giving banks access to valuable, actionable intelligence they can use.
What is banking as a service? (BaaS)
Banking as a service (BaaS) is a model where a licensed bank exposes its regulated banking functions (accounts, payments, cards, lending, KYC, AML) as APIs that non-bank businesses can embed into their own products. A retailer can issue a branded debit card, a payroll company can hold employer funds, a marketplace can split payouts between sellers, all without becoming a bank. The bank earns API and revenue-share fees; the non-bank product gets banking capability without the regulatory burden of holding a banking license.
BaaS (Banking as a Service) refers to a model where banks provide their banking infrastructure and services to third-party companies to use and incorporate into their own products and services.
This means that non-traditional banking companies, such as fintechs, can use a bank’s existing core banking processes.
Account opening, KYC (know your customer), and payment processing are leveraged to create their own financial products without having to build the underlying banking infrastructure themselves. The bank provides the services, while the third-party company provides the front-end interface and customer experience.
Apple Pay is a great example of how a third-party company can use the payment processes set up by banks, in this case using existing credit cards, and streamline the customer’s payment experience.
What is embedded finance?
Embedded finance refers to the integration of financial services and products into non-financial platforms, such as e-commerce, social media, or mobile apps.
This means that businesses that are not primarily in the financial industry, can offer financial services to their customers by partnering with financial institutions.
For example, a retailer might offer point-of-sale financing, allowing customers to pay for a purchase in installments, or a ride-sharing app might offer a credit card to its drivers for fuel and maintenance expenses.
In summary:
- Open Banking is focused on opening access to financial data to promote innovation and competition in the financial industry and strengthens consumer data portability.
- BaaS (Banking as a Service) is a service model where banks provide their banking infrastructure and services to third-party companies.
- Embedded finance is focused on integrating financial services into non-financial platforms.
What does Open Banking have to do with BaaS and embedded finance?
Open Banking is based on a common, open, shared standard for the secure exchange of financial data. Historically, proprietary APIs or screen scraping have been the methods used to transfer data.
The problem is that proprietary APIs require valuable technical resources, with dedicated teams to create and maintain them , and then work with third-party proprietary APIs.
Meanwhile, screen scraping opens up a bank to security risks and customer satisfaction issues; anytime an institution makes changes to their interface, the screen scraping process can break down.
It’s in part for these reasons that, in North America, the first CFPB-recognized open banking standard is FDX (Financial Data Exchange), with 94 million consumer accounts on the FDX API and adoption growing at a very fast pace.
Adopting standardized open banking APIs positions FIs to move ahead with BaaS and embedded finance.
Moving forward with an integrated solution
Axway’s Amplify Open Banking solution supports the FDX standard and addresses the complexities of CFPB 1033 and other open banking regulations. It manages consents meticulously and supports collaboration with fintechs, reducing overhead and accelerating innovation.
Low-code, no-code capabilities enable FIs to deploy business processes quickly, monetize APIs, and create new revenue streams, meeting their need for agility in today’s competitive market. It also makes it easier to speed adoption thanks to an intuitive API developer experience.
These capabilities make Amplify Open Banking the ideal platform for an evolving digital finance strategy that embraces open banking, BaaS, and embedded finance. The solution empowers banks to offer innovative, personalized financial services that win customer trust and loyalty, enhancing upselling and cross-selling opportunities.
Its BaaS and white-labeling capabilities allow financial institutions to distribute products through partners and support embedded finance strategies, positioning them as “invisible banks” for non-bank partners.
BaaS, embedded finance, and open banking FAQs
What is embedded financing and embedded banking? Embedded financing is the delivery of credit, payments, insurance, and accounts inside non-financial customer journeys (checkout flows, payroll apps, marketplaces). Embedded banking is the narrower subset where a non-bank product offers bank-grade accounts, debit cards, and money movement powered by a licensed bank under a BaaS contract.
Embedded finance vs banking as a service: which is which? Embedded finance vs banking as a service is a layer question, not an either-or. Banking as a service is the API layer: a licensed bank exposes accounts, payments, and cards as APIs. Embedded finance is the customer-facing layer that consumes those APIs to deliver a financial product inside a non-financial experience. Asked the other direction, banking as a service vs embedded finance: BaaS is the supply, embedded finance is the demand.
What is banking as a service? What is banking as a service: it is a licensed bank operating model where regulated banking capabilities (deposit accounts, card issuance, payments, lending, KYC, AML) are productized as APIs that any non-bank business can integrate. Banking as a service embedded finance describes the full stack: BaaS APIs delivering embedded finance experiences. BaaS embedded finance is the same concept shortened.
How does open finance help embedded finance? How open finance helps embedded finance: open finance (the next phase of open banking that covers investments, pensions, insurance, mortgages) gives embedded products richer data signals (full financial picture, not just bank account) so the credit decision, the savings nudge, or the insurance quote inside a non-financial app is more accurate. Open banking as a service is the bank-side counterpart, a managed offering that runs the compliance, gateway, and consent infrastructure.
What is the difference between open finance vs open banking, embedded finance, and open banking vs embedded finance? Open finance vs open banking embedded finance: open banking covers payment accounts, open finance extends to savings, pensions, insurance, mortgages, and investments. Open banking vs embedded finance: open banking is the data and payments rails (regulated), embedded finance is the product experience built on top (often using BaaS).
What is embedded finance in banking? Embedded finance in banking means licensed banks distribute financial products through partner channels (retailers, SaaS platforms, marketplaces) rather than through their own branch or app. The bank stays the regulated provider, the partner owns the customer experience.
It’s time to accelerate your open banking strategy
Real-world BaaS and embedded finance examples
The clearest way to understand BaaS and embedded finance is to look at products customers already use.
- Shopify Balance. Merchants get a business bank account inside Shopify, powered by Stripe and a partner bank under a BaaS arrangement.
- Uber driver accounts. Drivers get instant payouts to a debit card issued through a BaaS provider, no separate bank account required.
- Klarna and Affirm at checkout. Embedded buy-now-pay-later credit decisions delivered inside the retailer checkout flow.
- QuickBooks business loans. Working-capital loans offered to small businesses based on their accounting data, embedded in the accounting product.
- Apple Pay and Apple Card. Embedded payments and a credit card issued by Goldman Sachs under a BaaS partnership.
- Tesla insurance. Embedded car insurance offered at point of vehicle purchase using telematics data.
Each of these requires three layers working together: the regulated bank, the BaaS middleware, and the customer-facing product. An API management platform like Amplify Fusion sits across all three, governing the APIs, enforcing security policy, and providing the audit trail regulators expect.
BaaS vs embedded finance vs open banking side by side
The three terms get used interchangeably but describe different layers of the same stack.
| Concept | What it is | Who provides it | Who consumes it |
|---|---|---|---|
| Open banking | Regulated API access to customer-permissioned bank data and payments | Banks (mandated by regulators) | Licensed third parties |
| Banking as a service (BaaS) | Bank-licensed capabilities (accounts, cards, payments) exposed as APIs | Licensed banks (often via BaaS middleware) | Non-bank businesses |
| Embedded finance | Financial product delivered inside a non-financial customer experience | Non-bank businesses (using BaaS) | End customers |
Open banking is the regulation layer, BaaS is the API layer, embedded finance is the customer experience layer. A retailer offering buy-now-pay-later at checkout is delivering embedded finance, powered by BaaS APIs from a lending bank, which may use open banking data to make the credit decision.
Whether you have an open banking,BaaS , or embedded finance strategy, your first step should be to adopt the FDX API standard, package your APIs into API products, then ditch your old-fashion dev portal to publish them on a modern digital enterprise marketplace that can sit on top of any of your API infrastructure and assets.
Amplify Open Banking provides all the tools to make that happen and evolve your digital banking strategy in line with your own pace and objectives.
Let our experts help you with your business strategy and guide you through deployment.