By Joe Casali, AAP, AFPP, APRP, Executive Vice President, NEACH
Banking-as-a-Service (BaaS) is reshaping how financial institutions (FIs) deliver payment services, yet some FIs may remain wary or feel unfamiliar with the concept. Hesitancy can be a disservice when significant growth is at stake: The BaaS market is forecasted to reach $60.35 billion by 2030. However, in a recent NEACH poll, only 21.74% of financial professionals surveyed feel confident about their BaaS understanding, while 78.26 % admit they're neutral or have little to no familiarity with it.
BaaS allows non-bank and FinTech platforms to partner with licensed banks to provide financial products and services without building their own banking infrastructure. This model is taking off among FinTech startups, non-bank FIs, and even legacy tech companies seeking to embed banking capabilities into their platforms.
The payments revolution
The shift toward mobile and digital-first banking is accelerating BaaS adoption worldwide. As mobile devices become the primary way for customers and members to conduct financial transactions, businesses and consumers are seeking integrated, digital solutions.
The shift is already visible; according to a recent PYMNTS article, almost half of recently opened checking accounts were with FinTech platforms rather than traditional banks. That threat to traditional banking also can be an opportunity for savvy institutions. By creating virtual accounts tied to various FinTechs and businesses, BaaS providers can attract new customers while generating additional revenue streams. The potential is exciting; embedded financial services can create new opportunities for revenue growth and deeper customer and member relationships.
Smaller FIs, especially, stand to benefit. By using existing banking infrastructure through APIs, they can roll out new products quickly-in weeks, not months. That means community banks and credit unions can compete with banking's big players without spending years building infrastructure.
The reality check: risk and compliance
However, jumping into BaaS offerings brings with it its own risk: BaaS banks made up just 3% of the market in 2023, yet these institutions were responsible for 13.5% of major enforcement actions. The news weighs on those in the NEACH poll: 37% of them are moderately to highly concerned about BaaS risks, while 56.5% are sitting on the fence. Only 6.5% aren't worried.
So, while opportunity abounds with BaaS offerings, FIs need to balance the reward with the risk, and the path forward is clear: Treat BaaS as a strategy, not just technology. The industry is shifting toward direct partnerships between banks and technology providers, cutting out unnecessary intermediaries.
Regulatory frameworks are also evolving to support this growth-initiatives like the European Union's revised Payment Services Directive (PSD2) are promoting open banking and making it easier for third parties to access banking data and create new services. This regulatory support is opening doors for a wider range of offerings while demanding strong compliance frameworks and real oversight of payment flows. Only time will tell how these trends will impact the U.S. market, but embedded payments and more open banking efforts have been widely discussed.
Next steps
The payments landscape is changing, and FIs need to evolve with it to remain competitive. When financial services are woven into everyday platforms, customers and members engage more frequently, stay longer, and deliver higher lifetime value. The FIs that devote time to building strategic partnerships, investing in compliance infrastructure, and staying ahead of regulatory change will capture the value of these exciting possibilities and explore new avenues for growth.
For more information on BaaS and how it can support your FI, check out NEACH's webinar "Banking-as-a-Service (BaaS) and FinTech Partnerships," part of our 2026 Emerging Payments Technology Bundle. For those interested in an examiner-ready program that equips financial institution leaders to design, launch, and govern fintech partnerships and embedded payments safely and profitably under full institutional oversight, check out NEACH's new Fintech Integration Leadership series.
NEACH - New England Automated Clearing House Association is a neutral, member-focused advocate. Our role is to give you the intelligence, context, and connections you need to make informed strategic decisions. We bring together industry leaders, policymakers, and innovators so you can evaluate innovation through the lens of your institution’s mission and market strategy. For more information, visit neach.org.