"Banking as a Platform" (BaaP) and "Platform as a Banking" (PaaB) are two concepts emerging in the financial technology (FinTech) sector, each representing a different approach to integrating banking services with digital platforms.

Banking as a Platform (BaaP)

1. Definition: BaaP refers to the model where banks provide their infrastructure and services as a platform that other companies can use to offer financial services. It's akin to 'banking-as-a-service' (BaaS).
2. Key Characteristics:
   • Open APIs: Banks provide application programming interfaces (APIs) that enable third-party developers to build applications and services around the financial institution.
   • Collaboration with Fintechs: Encourages partnerships between traditional banks and fintech companies.
   • Customization and Integration: Allows for the creation of customized financial services and integration into non-banking platforms (like retail websites or social media apps).
3. Advantages:
   • Expands the reach of banking services.
   • Enables banks to innovate faster by collaborating with fintech companies.
   • Helps banks to focus on their core competencies while allowing others to develop customer-facing solutions.
4. Challenges:
   • Security and privacy concerns with third-party integrations.
   • Regulatory compliance issues.
   • Potential for brand dilution if services are not up to the bank's standards.

Platform as a Banking (PaaB)

1. Definition: PaaB is a newer concept where non-banking platforms start offering banking services. It's the idea of embedding banking operations within other business models.
2. Key Characteristics:
   • Embedded Finance: Integration of financial services into non-financial platforms.
   • Non-Banks Entering Finance: Companies from different sectors (like tech or retail) offering banking services.
   • Customer Centricity: Focus on providing a seamless customer experience by integrating financial services into platforms where customers already engage.
3. Advantages:
   • Increases convenience for customers by integrating financial services into platforms they frequently use.
   • Opens up new revenue streams for non-banking companies.
   • Can lead to innovative financial products tailored to specific platform ecosystems.
4. Challenges:
   • Managing the complexities of financial regulations.
   • Ensuring robust security and data protection.
   • Maintaining trust with users not accustomed to receiving financial services from non-banks.

Comparison

• Innovation Driver: BaaP is driven by banks collaborating with fintechs, whereas PaaB is driven by tech companies or other businesses venturing into finance.
  • Focus: BaaP is more about banks extending their capabilities to others, while PaaB is about non-banking platforms incorporating banking services.
• Regulatory Landscape: Banks in BaaP are already familiar with banking regulations, while companies in PaaB may need to navigate unfamiliar regulatory waters.

Both models reflect the ongoing evolution in the financial industry, driven by digital transformation and changing customer expectations. As these models develop, they will likely continue to reshape the landscape of financial services.

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Modernizing transaction banking | Deloitte US