In 2019, a company called Unit launched with a single product: an API that let any software company offer bank accounts to its users. By 2024, Unit powered financial products for over 200 companies across real estate, healthcare, gig economy, and e-commerce. None of those companies held banking licences. None employed compliance officers. None maintained relationships with bank regulators. They used Unit’s platform, which in turn sat on top of a licensed partner bank, to deliver banking features as naturally as they delivered notifications or search results. That model is banking-as-a-service, and the market for it reached $18.6 billion globally in 2024, according to Global Market Insights, growing at 15.1% annually toward $73.7 billion by 2034.
How Banking-as-a-Service Works
A BaaS platform has three layers. At the bottom is a licensed bank (the “sponsor bank” or “partner bank”) that holds the banking charter, maintains regulatory compliance, and provides deposit insurance through schemes like FDIC in the US or FSCS in the UK. This bank is regulated, examined, and supervised exactly like any other bank.
In the middle is the BaaS platform itself: a technology company that has built APIs for core banking functions (account opening, payments, card issuing, lending, compliance screening). The platform translates the complex, regulation-heavy processes of banking into simple API calls that any developer can integrate. Companies like Unit, Treasury Prime, Synapse (before its collapse), and Bond built these middleware layers.
The Boston Consulting Group projects fintech revenues will reach $1.5 trillion by 2030, with embedded finance and digital lending accounting for the largest share of projected growth.
According to CB Insights’ 2024 fintech report, global fintech funding declined 40 percent between 2022 and 2024, pushing the sector toward consolidation and a sharper focus on profitability over growth at all costs.
At the top is the end-user company: a fintech app, an e-commerce marketplace, a gig economy platform, or a corporate payroll provider that wants to offer financial features to its customers. This company designs the user experience, acquires customers, and manages the relationship. It never touches the banking infrastructure directly.
The model works because each layer specialises. The bank handles regulation. The platform handles technology. The end-user company handles customers. Platform-based models account for 69% of the global BaaS market, per Global Market Insights, because the specialisation produces better outcomes at each layer than any single institution could achieve across all three.
Why BaaS Is Growing at 15.1% Annually
Three factors drive BaaS growth. The first is the economics of embedded finance. When Shopify offers merchant cash advances or when Uber provides instant driver payouts, the financial product is delivered at the point of need, within the platform the customer already uses. Customer acquisition cost for embedded financial products is a fraction of the cost for a standalone bank, because the customer relationship already exists. The platform company handles distribution; the BaaS provider handles everything else.
The second factor is the cost and difficulty of obtaining a banking licence. In the US, a de novo bank charter application takes 18 to 36 months, requires $20 million to $50 million in initial capital, and demands ongoing regulatory compliance that costs millions per year. BaaS allows a company to offer banking products without obtaining its own licence, using the partner bank’s charter instead. For a startup that wants to launch a financial product in six months rather than three years, BaaS is the only viable path.
The third factor is cloud infrastructure. BaaS platforms run on cloud services that scale automatically with transaction volume. Cloud deployment accounts for 67% of the BaaS market, per Global Market Insights. The variable-cost model of cloud computing means BaaS providers can serve small clients (processing thousands of transactions per month) and large clients (processing millions) on the same platform, adjusting capacity automatically.
The US Market: BaaS at Scale
The United States is the largest BaaS market, reaching $5.9 billion in 2024 per Global Market Insights. The concentration reflects several US-specific factors.
The US has over 4,000 FDIC-insured banks, many of them small community banks with limited technology capabilities but valuable banking charters. BaaS creates a revenue stream for these banks: they earn fees for providing their charter and regulatory infrastructure to fintech companies, without needing to build consumer-facing technology themselves.
Regulatory fragmentation in the US (federal and state regulators, different rules for different bank types) makes obtaining a licence particularly complex. BaaS providers that have navigated this complexity and established relationships with licensed banks offer significant value to companies that want to avoid the regulatory maze.
The large and fragmented US fintech market provides a deep pool of potential BaaS customers. Thousands of fintech companies, software platforms, and marketplaces want to offer financial products to their users. Banks globally process over 2 billion API calls daily, handling $676 billion in transaction value, per Coinlaw. A significant share of US API banking volume flows through BaaS platforms.
The Synapse Collapse and Its Aftermath
The risks of the BaaS model became visible in 2024 when Synapse, one of the largest US BaaS middleware providers, collapsed. Synapse sat between several fintech companies and their partner banks. When Synapse failed, the connection between the fintech apps and the underlying bank accounts broke. Customers could not access their funds for weeks. The FDIC insurance that protected the deposits did not help with the immediate liquidity problem, because the deposits were technically safe at the partner bank but inaccessible through the failed middleware.
The collapse triggered a regulatory response. The FDIC issued guidance requiring sponsor banks to maintain direct access to customer data and account records, independent of any middleware provider. The OCC increased examination frequency for banks with significant BaaS partnerships. State regulators began investigating whether fintech companies using BaaS were adequately disclosing the banking partner and deposit insurance status to customers.
The Synapse failure did not slow BaaS growth. It redirected it. The market is moving toward direct bank-to-fintech relationships (cutting out the middleware layer) and toward larger, more established BaaS providers with stronger balance sheets and deeper regulatory relationships.
BaaS Outside the United States
In Europe, the BaaS model operates differently because of the single banking passport. A bank licensed in one EU member state can offer services across all 27, reducing the regulatory complexity that drives BaaS demand in the US. European BaaS providers like Solarisbank (Germany), Railsr (UK), and ClearBank (UK) provide banking infrastructure to fintech companies, but the market is smaller and more concentrated than in the US.
The neobanking market, which overlaps significantly with BaaS (many neobanks are built on BaaS infrastructure), reached $210.16 billion in 2025, per Fortune Business Insights, with Europe holding 37.20% of the global share. European neobanks use BaaS infrastructure for specific functions (card issuing, compliance screening, cross-border payments) even when they hold their own banking licences.
In Asia, BaaS is emerging through digital banking licences issued in Singapore, Malaysia, and Indonesia. These licences create a regulated entry point for technology companies that want to offer banking services. The cross-border payments opportunity, which reached $371.59 billion in 2025 per Fortune Business Insights, is particularly relevant in Asia, where remittance flows between countries are among the largest in the world.
Banking-as-a-service has turned the banking licence from a barrier to entry into a rentable resource. The model has flaws, as Synapse demonstrated, and regulation is tightening. But the underlying economics, specialisation at each layer of the banking stack, are sound, and the market will continue to grow as more companies discover that they can offer financial products without becoming banks.
