If you’re keen to offer your customers financial products such as current accounts, savings accounts, or payment cards, you may already know that applying for a banking license is a complex and time-consuming process. 

What’s more, you can incur significant costs, including the full licence application fees, the minimum capital required by the Bank of England, and the resources that go into building and maintaining the accounts and payments infrastructure. 

Banking as a Service, or BaaS, offers an alternative path for companies that:  

• Don’t have the time or resources to apply for a full banking licence 
• Need to launch their product quickly 
• Want to work with an API-first partner that can scale as they grow 

We’ve written this guide to help you understand how BaaS works, when it makes sense to use it, and how to choose the right BaaS partner. 

In this article, we’ll cover:  

• What is Banking as a Service (BaaS) and how does it work?  
• When does it make sense to work with a BaaS provider?  
• 4 questions to ask when choosing the right BaaS provider 
• Why partner with ClearBank as your BaaS provider? 

ClearBank is an API-first bank that offers Banking-as-a-Service. To learn more about how we can help you integrate financial products into your platform, reach out to us.

Banking as a Service (BaaS) is when licensed entities, such as banks, allow companies without a banking licence – such as fintechs, retailers, and marketplaces – to use their banking infrastructure and embed financial services into their platforms.

This could be a single product, such as a wallet, or a full suite of banking products, including current accounts, interest-bearing savings accounts, cards, and payments. 

Here’s how it works:

• Step 1: You partner with a BaaS provider and decide which responsibilities fall onto whom – for example, many BaaS providers are responsible for payment scheme access, such as Faster Payments and CHAPS, and regulatory oversight, including AML and sanctions monitoring, regulatory reporting, and ongoing audits.  
• Step 2: You’ll integrate with the BaaS provider via an API (Application Programming Interface). The API connects your platform to the bank’s core infrastructure, allowing you to securely access banking functionality such as opening an account, initiating payments, and retrieving balances. 
• Step 3: You can now customise your BaaS product with your own branding and offer embedded finance services to your customers, while the BaaS provider powers the underlying services.

You may have seen these three terms used interchangeably, but there are actually distinct differences between them. At ClearBank, here’s how we distinguish them: 

• BaaS is a model in which a BaaS provider (such as a licenced bank or an EMI) offers services, including accounts, cards and access to payment schemes via an API. 
• Embedded finance is an umbrella term for any financial service, such as payments, insurance, or lending, that’s integrated into non-financial apps. 
• Embedded banking is a subset of embedded finance focused specifically on regulated banking products – such as savings accounts with FSCS-eligible deposit protection – delivered by a licensed bank through another platform.  

BaaS can suit a range of different companies, such as:

• Fintechs that use BaaS to deliver products like debit cards or savings accounts in months rather than years, helping them compete with traditional banks. 
• E-commerce platforms and online marketplaces can use BaaS to embed payments and manage money flows. This includes opening and managing accounts or providing customers with branded cards. Marketplaces can also create in-platform seller accounts, enabling these merchants to hold and access earnings without immediately transferring funds to an external account.  

For instance: the e-commerce platform Shopify allows its customers to accept payments, open a business bank account, and even access lending without leaving Shopify’s interface. 

• Gig economy platforms like food delivery apps rely on BaaS to enable instant or same-day payouts. In-app wallets also allow workers to receive and withdraw funds seamlessly, improving their cash flow.  

Here are a few key signs that working with a BaaS provider might be for you:  

• You want to improve customer retention by expanding your product offering. Products such as savings accounts and loans can help you to differentiate, cross-sell to your customers, and increase customer lifetime value. 
• You need to go to market as quickly as possible, and obtaining a banking licence isn’t aligned with your strategy. To deliver features such as FSCS-protection eligibility on customer deposits, you need a licence, but it’s costly, complex, and time-consuming. Expenses include application fees, minimum Bank of England capital requirements, staff and compliance costs, ongoing audits, and governance structures, not to mention that banks spend around 6-12% of their revenue on IT infrastructure. A BaaS provider simplifies this by providing the core infrastructure and products you need, reducing your time-to-market from years to months. 

When weighing up your options, consider asking:

BaaS providers can be either licensed banks or EMIs. While EMIs can provide e-money accounts and payment scheme access (either directly or through a partner), they can’t pay interest on customer balances. They also can’t offer bank accounts that qualify for deposit protection schemes like FSCS. 

If you want to one day scale from payment-led products to more sophisticated account options, such as easy access savings accounts or even Cash ISAs, it may be easier to partner with a licenced bank that already has these capabilities in place. 

This begs another question: can this provider support new product launches? And do they have the international payment rails in place to help you grow globally?

It’s important to partner with a company that can grow alongside you and provide ongoing support. Ideally, they already have examples of having reached this scale with other companies, so you know it’s possible. 

To launch products quickly, you need a BaaS provider that’ll move in step with you. This means providing you with regular updates on the integration process via a dedicated relationship manager and ensuring that your developers have consistent access to well-documented APIs, sandbox environments, and ongoing technical support.

Modern BaaS providers typically offer an API for integration. Some banks offer multiple APIs for different products – such as one for creating accounts and another for issuing cards – which may take longer. Others offer all their products via a single API, keeping the process straightforward. 

When accounts freeze, or payments fail, your reputation and customer trust are on the line – which is why robustness should be a top consideration when choosing a BaaS partner. 

Look for providers with highly resilient environments, such as active-active API architectures (where APIs are powered by multiple live systems) and dynamic failover (where requests are rerouted in real-time if an issue occurs).

Check for high straight-through processing (STP) rates, too. These indicate that the majority of payments and account processes are handled automatically, end-to-end, with no manual intervention. This reduces exception handling and operational risk while ensuring speed.

Security is another major factor. Ask: 

• Do they offer a zero-trust approach where sensitive data is locked down to anyone outside their authorised persons?  
• How is the connection secured?

As a BaaS customer, you should consider that the product will be under your branding: any reliability, performance, or security issues will reflect on your brand in the eyes of customers.

Some mass-retail banks and B2C financial institutions offer BaaS services alongside their own retail products.

For example, if you plan to launch a savings account for young families and choose a BaaS provider that already offers a comparable product, you’ll benefit from their existing infrastructure – but they’ll also be marketing a very similar service to the same audience, raising concerns around long-term alignment.

Some B2B BaaS providers, such as ClearBank, don’t compete in the same arena as you. This means they can act as a long-term strategic partner rather than a mere vendor. 

ClearBank is a UK-authorised, API first bank with a proven track record and ROI. We deliver near real-time processing to give your customers a smooth user experience, and through our embedded banking proposition, you can also offer FSCS-protection on eligible deposits and interest-bearing accounts without the regulatory and operational overhead of obtaining a banking licence yourself.

Clients like Chip, Coinbase, Capital on Tap, Revolut, Tide, and Wealthify already rely on our infrastructure and in-house expertise to deliver interest-bearing accounts and Cash ISAs. Built as a B2B banking partner, you can see us as an extension of your team that doesn’t compete with you for deposits.

Here are three reasons businesses choose to work with us:  

Not all BaaS providers are licensed banks. If your provider is an EMI, for instance, you can’t offer FSCS protection on eligible deposits and interest-bearing savings accounts. 

This means customers are likely to use your services for one-off transactions rather than long-term deposits, preventing you from: 

• Taking part in balance-based, shared interest models as an additional source of revenue 
• Creating tailored products based on long-term customer data  
• Cross-selling opportunities to the right customers at the right time 
• Establishing yourself as a highly secure platform with FSCS protection in place 

With ClearBank’s embedded banking solution, you can achieve the above – without taking on the costs and regulatory burden of holding a full banking license yourself. 

 Based on an analysis by the leading consultancy firm Forrester and its Total Economic Impact (TEI) model, our embedded banking proposition is proven to deliver significant ROI.

We’ve helped our clients: 

• Achieve up to 90% ROI, with payback realised in as little as 10 months 
• Generate £9.7m in profit through product expansion, new customer acquisition, and cross-selling to your existing customer base 
• Improve customer retention by 3% 
• Reduce customer queries by an estimated 10% due to ClearBank’s stability and resilience, equating to a cost saving of nearly £63,000 

 Read the full report here: The Total Economic Impact™ Of ClearBank Embedded Banking 

All eligible deposits are protected up to £120,000 under the UK’s deposit guarantee scheme, and all client funds are held securely at the Bank of England and are available 24/7, year-round.  

The delayed transaction updates and inconsistent balance reporting associated with legacy systems create friction for customers and additional workload for your teams.

At ClearBank, we deliver API-first, payment processing across Faster Payments and CHAPS as part of our embedded banking model. This means you can provide your customers with: 

• Real-time payment confirmations 
• Immediate balance updates 
• Event notifications as transactions happen 
• Account reconciliations in real time 

The result is a smoother customer experience that scales with transaction volume without adding manual overhead. 

At ClearBank, we take care to keep downtime to a minimum, with backup processes in place to ensure your customers are never waiting for their salary or bills to be paid – even as you scale.

We built our infrastructure to handle millions of transactions, and large fintechs like Revolut, Chip, and Coinbase, use ClearBank’s embedded banking services to support their fast-growing customer base. 

Moreover: 

• Our Information Security Management System (ISMS) is certified to ISO 27001 standards 
• Our Business Continuity Management System (BCMS) is certified to ISO 22301 

Read more: Security overview 

Chip is a UK-based fintech helping customers grow their wealth through investments in real assets, diversified funds, and savings products. 

As the company scaled, it needed to move beyond the EMI structure to introduce individual FSCS-protected, interest-bearing accounts. “That’s what customers told us they wanted and needed, which led us to find a partner who could deliver it,” explained Corinna Lamberti, Chief Product Officer at Chip. 

Chip initially partnered with ClearBank through agency banking services before transitioning to an embedded banking model. Through this setup, Chip was able to: 

• Offer instant access savings accounts that pay interest on deposits, serving more than 200k customers and reaching £2.7bn in deposits (as reported in July 2024) 
• Provide customers with near real-time balance updates 
• Launch a Cash Individual Savings Account (ISA), allowing customers to save up to the annual £20,000 tax-free allowance

“Offering an ISA product is not the easiest thing,” Lamberti said. “We worked hand in hand with ClearBank to make that happen, pushing each other to ensure we delivered the best possible product.” 

Within the first five months of launch, more than 85k Cash ISA accounts were opened, with £1.3bn deposited. 

Read the full case study: How Chip is enhancing the savings experience with ClearBank Embedded Banking 

BaaS offers a route for businesses that want to offer financial products without the expense and operational burden of applying for a banking licence. As a result, it provides a faster route to market and removes the regulatory burden of ongoing reporting, capital and liquidity requirements, and direct engagement with the regulator.

Choosing the right BaaS provider from the outset can also ensure a secure and reliable connection, reduce stress for your team with a single API, and enable you to easily scale your product in the future.  

ClearBank is a cloud-native, API-first bank. Through us, you can offer embedded financial products to your customers while we handle the underlying infrastructure.

Want to learn more about how our BaaS partnerships work? Get in touch.