Banking is no longer just for banks. Over the past decade, a quiet revolution has been reshaping the financial sector: Banking-as-a-Service (BaaS). This model allows non-banks — from retailers to fintech startups — to offer banking-like products by leveraging licensed banks’ infrastructure via APIs.
What used to take years, cost millions, and require heavy regulatory approvals can now be done in months. In both North America and Europe, BaaS is powering a new generation of financial services, fostering competition, innovation, and customer choice. But the trends, regulations, and adoption paths differ significantly between the two regions.
Here’s a closer look at how BaaS is transforming finance — and what’s next for the US, Canada, and Europe.
What Is Banking-as-a-Service?
Banking-as-a-Service is a model where a licensed bank opens its core systems — such as payments, compliance, and account management — to third parties through APIs. Those third parties can then build and deliver financial products without becoming banks themselves.
For example, a ride-hailing company could issue driver debit cards with instant payouts. An e-commerce platform could offer installment loans at checkout. A fintech app could provide users with FDIC-insured savings accounts without holding a banking license.
In essence, BaaS turns banks into platforms, and software developers into financial service creators.
Why BaaS Matters
The rise of BaaS reflects several overlapping trends:
- Customer expectations: People want financial services integrated into their digital lives, not siloed in separate banking portals.
- Fintech innovation: Startups can focus on user experience and niche markets, while banks handle compliance and regulatory burdens.
- Revenue diversification: Banks earn fees from providing infrastructure, while partners monetize customer relationships.
- Regulatory openness: In some regions, open banking rules have encouraged API-based collaboration.
North America: Speed, Scale, and Fragmentation
In the US and Canada, BaaS has grown rapidly, driven by tech-forward banks and venture-backed fintechs.
The US Landscape
The United States has a unique banking ecosystem with thousands of banks, multiple regulators, and a thriving fintech sector. This fragmentation has actually helped BaaS flourish. Smaller, tech-friendly banks saw BaaS as a growth strategy, partnering with fintechs to provide services nationwide.
Examples include:
- Synapse, Treasury Prime, Unit: BaaS platforms connecting fintechs to multiple banks.
- Cross River Bank, Bancorp Bank: Early partner banks powering prepaid cards, lending platforms, and neobanks.
- Big tech moves: Apple, Google, and Amazon have explored financial offerings, often relying on BaaS partners.
However, US BaaS faces regulatory scrutiny. In 2023–2024, the FDIC and OCC increased oversight of “rent-a-bank” models, ensuring fintech partners meet compliance standards. The “bank-fintech partnership model” is under review, as regulators balance innovation with consumer protection and systemic stability.
Canada’s Cautious Growth
Canada has fewer banks and a more concentrated regulatory environment. BaaS adoption has been slower but is gaining momentum. Open banking frameworks are still in development, which limits widespread API-driven collaboration. That said, partnerships between fintechs and major banks are emerging, especially around payments and embedded finance.
Canadian fintechs often look to US-based BaaS providers or leverage international platforms until domestic regulations mature. As open banking advances, Canada is expected to see a surge in embedded finance offerings.
Europe: Regulation-Driven Innovation
Europe’s financial sector has been transformed by regulatory catalysts — notably PSD2 and the EU’s push for open banking. These rules require banks to open up data and payment initiation capabilities to licensed third parties, creating a fertile ground for BaaS and embedded finance.
Key dynamics in Europe include:
- Specialized BaaS platforms: Solarisbank (Germany), Treezor (France), and Railsr (UK) offer end-to-end infrastructure for fintechs, challenger banks, and brands.
- Challenger banks: Many neobanks started with BaaS partnerships before obtaining licenses themselves (e.g., Monzo, N26).
- Cross-border complexity: Europe’s single market is integrated but still fragmented by language, culture, and local financial regulations, making scalability both an opportunity and a challenge.
European regulators generally view BaaS positively — as long as providers meet AML, KYC, and capital requirements. The emphasis is on consumer protection and competition.
Comparing North America and Europe
| Factor | North America | Europe |
|---|---|---|
| Regulatory Drivers | Market-driven, fragmented oversight | PSD2 and strong open banking mandates |
| Adoption Speed | Fast in US, slower in Canada | Rapid across multiple markets |
| Bank Involvement | Community and niche banks leading innovation | Specialized BaaS banks and fintechs |
| Risk Focus | Compliance gaps and rent-a-bank concerns | Licensing, passporting, and consumer protection |
| Embedded Finance Use Cases | Gig economy, neobanks, big tech wallets | Challenger banks, retail/loyalty programs, cross-border payments |
Opportunities and Challenges
Opportunities
- New revenue models: Non-financial companies can integrate banking into their offerings, increasing customer loyalty and monetization.
- Financial inclusion: Faster, cheaper access to accounts and credit for underserved populations.
- Cross-border scaling: Platforms can build once and expand across regions with compatible regulatory frameworks.
Challenges
- Regulatory uncertainty: Different interpretations of bank-fintech partnerships can slow innovation.
- Operational risk: Outsourcing core banking functions creates dependencies and cybersecurity concerns.
- Reputation risk: A fintech’s failure can reflect poorly on its partner bank, and vice versa.
The Road Ahead
Both North America and Europe are entering the next phase of BaaS evolution. Expect to see:
- More scrutiny: Regulators will tighten oversight to ensure consumer protection and systemic stability.
- Infrastructure consolidation: A handful of BaaS platforms may dominate, providing standardized, scalable solutions.
- Deeper integration: Banking will become invisible — built into apps, cars, appliances, and even virtual worlds.
- Hybrid models: Some fintechs will “graduate” from BaaS to full licenses, while banks may acquire successful fintech partners.
Ultimately, BaaS is less about replacing banks and more about changing where banking lives. Instead of forcing customers to go to banks, financial services will come to customers — wherever they are.
Final Thoughts
Banking-as-a-Service is not a passing trend; it’s a structural shift. In both North America and Europe, it is breaking down barriers to innovation, enabling new entrants to create tailored financial experiences, and pushing traditional banks to rethink their role in the value chain.
The winners will be those who collaborate wisely, manage risk proactively, and stay ahead of regulatory expectations — while never losing sight of the ultimate goal: delivering better, safer, and more accessible financial services for everyone.