The rising demand for banking as a service and embedded finance presents significant opportunities for financial institutions.

“Banking as a service (BaaS) is when a company wants to utilize your core payment grants through APIs, without actually partnering together to provide the service. Their primary reason for being in business is to act like a bank,” Bridgit Chayit, executive vice president and head of commercial payments and treasury management at the $213 billion Fifth Third Bank, said during a March 19 panel at CBA Live 2025 in Orlando, Fla.

The two services can be intertwined. For example, Fifth Third in 2023 launched its own API-powered embedded payments platform, Newline. The platform is a growth factor for the bank’s commercial payments revenue, which jumped 7% YoY to $155 million in Q4, according to its Jan. 21 earnings report.

In contrast, embedded finance integrates banking or payment services into non-financial companies’ digital platforms to enhance their core offerings, she said.

The distinction enables FIs to reach different customers, presenting a lucrative opportunity, she said.

Banking as a Service and embedded payments combined can reach $900 billion in revenue generated for the financial services industry by 2032, Chayit said. “That’s an awful lot of revenue that’s being created.”

Long-term investment

Banks should embrace the BaaS market rather than worry about it creating more competition with fintechs, Chayit said, adding that banks can “win” if they commit to BaaS.

Springfield, Mo.-based Old Missouri Bank, is one of many banks to have found success with its BaaS model. The $1.4 billion bank is aiming to gain $500 million from its deposits from BaaS partnerships with SMB banking provider Meow and others.

Banks are looking to BaaS revenue to cover their operating expenses rather than relying on interest-based revenue, Carey Ransom, managing director at financial services-focused strategic investment fund BankTech Ventures, told BAN.

“Net interest margins around lending continue to compress” with rising competitiveness in the industry, Ransom said. Banks are evaluating other revenue streams they can tap into by providing banking technology and payments services to fintechs or businesses for additional income, he said.

BaaS serves as “a way to actually engage in the whole revenue cycle that is surrounding it. It will continue to happen and to grow, but it is about approaching it as though it is going to be a long-term asset and not just a single opportunity that you build with it,” Fifth Third’s Chayit said.

Register here for the upcoming Bank Automation News webinar “Emerging fintechs: New technologies you need to know now” on Tuesday, April 8, at 11 a.m. EST.