BaaS vs Core Banking SaaS | Comparison Guide | CoreFi

Two acronyms dominate conversations about modern banking infrastructure: BaaS (Banking-as-a-Service) and Core Banking SaaS (Software-as-a-Service). Both promise to make banking technology more accessible, scalable, and cost-effective. But they represent fundamentally different approaches — and choosing the wrong one can limit your business for years.

This guide clarifies the distinction, compares the two models across key dimensions, and provides a framework for making the right choice.

Defining the Models

Banking-as-a-Service (BaaS)

BaaS provides banking capabilities as a regulated service. A BaaS provider holds (or partners with someone who holds) a banking license and offers APIs that allow non-banks to embed financial services — accounts, payments, cards, lending — into their products.

Key characteristic: The BaaS provider owns the regulatory relationship. Your customers are technically the BaaS provider's customers from a regulatory perspective, even though they interact with your brand.

Examples: Solaris (Germany), Railsr (UK), Swan (France), Griffin (UK).

Core Banking SaaS

Core Banking SaaS provides the technology platform for running banking operations, delivered as a cloud-hosted subscription service. The institution using the platform holds its own license and is directly regulated.

Key characteristic: You own the regulatory relationship. The SaaS provider is your technology vendor, not your regulatory partner.

Examples: Mambu, Tuum, Skaleet, Temenos Banking Cloud, CoreFi.

The Fundamental Difference: Control vs. Convenience

The core trade-off between BaaS and Core Banking SaaS is control versus convenience.

BaaS maximizes convenience: You get banking capabilities without needing a banking license, without building technology, and without dealing directly with regulators. The trade-off is that you don't control the banking infrastructure, you're dependent on your BaaS provider's capabilities and roadmap, and your margins are constrained by the BaaS provider's fees.

Core Banking SaaS maximizes control: You build on a technology platform that you configure to your needs, you hold your own license (or operate under one), and you control the customer relationship directly. The trade-off is that you need more regulatory, compliance, and operational expertise.

Detailed Comparison

1. Licensing & Regulation

• BaaS: No banking license required. You operate under the BaaS provider's license (or their partner bank's license). Regulatory compliance is largely managed by the BaaS provider.
• Core Banking SaaS: You need your own license (banking license, EMI, PI, or ECSP). You are directly regulated and responsible for compliance.

Implication: BaaS is faster to market for companies without licenses. Core Banking SaaS is necessary for companies that already have (or want to obtain) their own license.

2. Product Flexibility

• BaaS: Limited to the products and configurations the BaaS provider supports. Want a product type they don't offer? You're stuck.
• Core Banking SaaS: Full flexibility to configure any product the platform supports. Complex pricing, custom workflows, unique product structures.

Implication: If your competitive advantage depends on unique financial products, Core Banking SaaS gives you the flexibility to build them.

3. Unit Economics

• BaaS: Typically charges per account, per transaction, and/or a revenue share. At scale, these fees significantly compress margins.
• Core Banking SaaS: Typically charges a platform subscription plus transaction-based fees. At scale, unit economics improve dramatically.

Implication: BaaS is cheaper to start but more expensive at scale. Core Banking SaaS requires more upfront investment but delivers better margins as you grow.

4. Customer Relationship

• BaaS: Your customers are technically the bank partner's customers. In some models, the BaaS provider can access customer data and even compete with you.
• Core Banking SaaS: Your customers are your customers. Full data ownership and control.

5. Geographic Flexibility

• BaaS: Limited to markets where the BaaS provider is licensed. Expanding to new markets may require a different BaaS partner.
• Core Banking SaaS: Can deploy in any market where you hold or obtain a license. Single platform, multiple jurisdictions.

6. Risk Profile

• BaaS: Concentration risk on the BaaS provider. If they lose their license, face regulatory action, or go bankrupt, your business is directly impacted. Recent examples (Railsr's financial difficulties, regulatory actions against BaaS partner banks in the US) illustrate this risk.
• Core Banking SaaS: Technology vendor risk is lower — if the vendor has issues, your data and operations continue. You can migrate to another platform.

Decision Framework

Choose BaaS When:

• You don't have (and don't want) a banking license
• Speed to market is your top priority
• Your financial products are straightforward (standard accounts, cards, payments)
• You're testing the market and need to validate demand before investing in infrastructure
• Your scale is moderate (< 100K accounts)

Choose Core Banking SaaS When:

• You have (or plan to obtain) your own license
• Product differentiation requires custom financial products
• You're operating at scale (or planning to) where unit economics matter
• You need multi-market flexibility
• You want full control over the customer relationship and data
• Long-term margin optimization is a priority

The Hybrid Approach

Increasingly, companies start with BaaS for speed to market, then migrate to Core Banking SaaS as they scale and potentially obtain their own license. This is a valid strategy, but plan for the migration from day one — the longer you're on BaaS, the more complex the migration becomes.

The European Context

In Europe, the BaaS model is under increasing regulatory scrutiny. German regulators (BaFin) and US regulators (OCC, FDIC) have both raised concerns about the BaaS model, particularly around:

• Customer protection: Who is really responsible for the customer?
• Operational resilience: What happens when the BaaS provider fails?
• Compliance oversight: Is the licensed entity adequately supervising its BaaS partners?

This regulatory tightening favors the Core Banking SaaS model for companies serious about building sustainable financial services businesses in Europe. Holding your own license gives you direct regulatory standing and eliminates the intermediary risk.

How CoreFi Supports Both Models

CoreFi's platform is used by both licensed institutions (running their own operations on Core Banking SaaS) and by companies offering BaaS to their clients (using CoreFi as the technology layer powering their BaaS offering).

This dual-use capability means you can start with either model and evolve without changing your technology platform. Whether you're a licensed neobank seeking a modern core or a BaaS provider needing robust infrastructure, CoreFi's modular architecture adapts to your model.

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Need help choosing the right model? Book a demo and let's discuss your specific situation.