Banking as a service (BaaS) describes a platform that allows banks to give up their APIs to third parties to build new services. BaaS has become one of the core components of open banking, in which corporations give financial transparency alternatives for account holders by providing their application programming interfaces (APIs) for third parties to build new services.
This is effectively an end-to-end paradigm in which digital banks and other third parties are permitted to interact directly with bank systems via APIs, construct banking solutions on top of the providers' regulated infrastructure, and even unleash an open banking potential.
The financial institution provides its APIs to the TPP, giving them access to the systems and information needed to construct new banking products or provide white label banking services. Not to mention, legacy institutions can also create their own BaaS platforms, which offer up new revenue sources for them.