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5 minutes read

Embedded Finance Vs. Banking as a Service: Is There a Difference?

By Robert Kazmi
By Robert Kazmi
5 minutes read

Embedded finance and Banking as a Service (BaaS) both streamline financial services in new ways that enable businesses to improve the customer experience of their products and services. 

While embedded finance and Banking as a Service both enable a non-financial service provider to offer financial services and products, there are essential differences between the two that organizations need to understand before they decide which approach is best for integrating financial services into their products and business processes. 

This post will explain embedded finance and Banking as a Service. In addition, we will examine the critical differences between the two. 

Defining Banking as a Service and Embedded Finance

Since embedded finance and Banking as a Service both deliver financial services through digital technologies, there is often confusion between the two terms. In addition, BaaS is vital to supporting the infrastructure of embedded finance, which causes further confusion between the terms.

What Is Banking as a Service? 

Banking as a Service is a model that enables non-financial service providers to offer their customers banking services and financial products through APIs that connect to financial institutions

Essentially, BaaS is white-label banking. Instead of sending customers to a third-party financial institution, Banking as a Service allows businesses to offer their customers financial products and services typically associated with banks, such as checking accounts, loans, and insurance. 

It is time-consuming, difficult, and costly for businesses to develop their own banking infrastructure. BaaS allows businesses to access established financial infrastructures while maintaining their branding. 

A common example of BaaS is branded debit and credit cards. Businesses can offer customers these accounts that give them special rewards and perks. A popular example is the Apple credit card, which can be used to purchase and finance Apple products without interest. 

What Is Embedded Finance?

Embedded finance is the integration of financial solutions in non-financial settings. Embedded finance streamlines the customer experience. Embedded finance has been available to consumers long before smartphones and mobile banking were introduced.

For example, when you go to a car dealership to buy a car, they have a finance department that can help you secure a loan and purchase a car. This is one of the most common examples of embedded finance. 

Of course, with digital technology, embedded finance has become more commonplace and convenient. For example, when you use an app like Uber to book a ride or the Dunkin’ app to buy a coffee and donut, you don’t have to leave the application to make your purchase. This is another example of embedded finance. 

Embedded financial services can be used to offer financing, integrated payments, insurance, and much more. The embedded finance market is booming because businesses are learning the value of streamlining the customer experience and keeping their users in their apps or product. 

Breaking Down the Differences Between Embedded Finance and BaaS

Embedded finance and BaaS have a lot in common. Unfortunately, as we have noted, these similarities can cause a lot of confusion for businesses trying to figure out which model is the best option for their processes. 

The key differences between these two models include the following:

  • Frontend vs. backend 
  • Conversions 
  • Branding 

Frontend Vs. Backend 

Embedded finance is characterized by frontend access to financial services, whereas BaaS is characterized by access to the backend banking infrastructure

Another way to consider this difference is that embedded finance is concerned with integrated access to financial services. In contrast, BaaS is concerned with access to the technological foundation that financial institutions rely on to deliver services. 

Understanding this important difference between the two models will help your business determine which option is most aligned with its goals and operational needs. 


If you’re still unsure which financial model best suits your business objectives, understanding each option’s impact on conversions can be beneficial. 

BaaS is designed to meet the banking needs of a consumer; it is ongoing and good for establishing long-term relationships with customers. On the other hand, embedded finance is more immediate and focuses on streamlining the checkout process to drive conversions

Both models are great for establishing brand loyalty and delivering a great customer experience. Ultimately, a good customer experience will drive conversions. So both models are beneficial in this regard, but embedded finance is more immediate.


BaaS gives your organization greater control over branding, whereas, with embedded finance services, it is typically clear that an external source is delivering services

For example, Apple offers a branded credit card designed to match its brand image. Whereas embedded finance services like Affirm and Klarna are clearly labeled as such at the time of purchase on a platform like Amazon. 

If your business is interested in controlling branding, BaaS might be the best model for you to choose. However, even with embedded finance services, you can keep the interface and design of your product the way you like it. 

Apps like Uber, Dunkin’, Starbucks, etc., use integrated payment solutions from embedded finance providers, but these solutions are not tacky and do not clash with their in-app branding efforts. 

When we discuss branding, it is more about who the customer associates services with. For example, when using Uber, consumers understand that an external payment processing tool is being used in-app. However, when you get an Apple credit card, it is associated with Apple even though Goldman Sachs issues it. 

Final Thoughts 

BaaS and embedded finance are changing how businesses interact with customers, enabling them to offer new services and products. Choosing the right financial model is vital to the success of your application. 

If you want to learn more about open banking, embedded finance, or BaaS, contact an experienced FinTech development partner like Koombea.

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