“Next-Generation Banking” continues to be one of the most talked-about topics in the financial sector, with its content evolving slightly each year. Initially limited to a few simple features designed to make life easier through banks’ digital channels, this concept has now become deeply integrated into our daily lives. 

In recent years, banking and other financial services have emerged as the leading sectors where digital transformation is most visible. Innovations such as QR code transactions, voice response systems, and mobile payment solutions are among the most prominent examples. While digital banking first entered our lives through the internet and mobile branches, today it enables not only branchless transactions but also the ability to meet financial needs through various channels. This is precisely where Banking-as-a-Service (BaaS) comes into play. So, what is BaaS exactly, and why is it so important? 

Banking-as-a-Service is an innovative model that enables financial services to be delivered to end users via different platforms and third parties. Also referred to as the “service banking model” in the literature, it extends the financial convenience offered by banks into various areas of daily life. This model benefits not only individual end users but also banks and their partner companies. Banks can reach a broader customer base and expand their sales and marketing activities, while partner companies can enhance customer loyalty by offering financial advantages. 

With the advancement of API-based technologies, financial solutions have become significantly more flexible and accessible compared to traditional banking services. In countries like the UK and Germany, regulatory frameworks have enabled banks and fintech companies to collaborate and rapidly implement open banking and BaaS applications. The European Union’s PSD2 (Payment Services Directive 2) regulation has played a critical role in this transformation, fostering an innovative and competitive financial ecosystem. In Turkey, the Banking Regulation and Supervision Agency (BDDK) established a legal framework for BaaS with the regulation published in 2022. Today, banks can offer their infrastructure as a service to technology companies and fintechs, enabling solutions such as: 

One of the most impactful areas for individual users is microcredit offerings on e-commerce platforms. With various bank loan options presented at checkout, customers can now finance, split their payments into installments, or defer them instantly. 

How Does Banking-as-a-Service Work? 

The foundation of BaaS was laid with the emergence of Open Banking. This modern banking model allows customers to securely share their financial data with authorized third parties, providing easier access to a wide range of digital banking services. This data sharing is facilitated through APIs, and many users first encountered it through the “One bank, all accounts” feature. 

BaaS builds upon Open Banking. While Open Banking focuses on data sharing, BaaS takes it a step further by opening up banking infrastructure to third parties. For example, a fintech company can use a partner bank’s APIs to develop its own mobile payment solution. This allows users to make secure and fast payments using the bank’s infrastructure. At the same time, banks can reach new customers and create additional revenue streams through such partnerships. 

Here’s a more technical breakdown of how it works: