In a world where financial services are no longer the sole domain of banks, enterprise leaders are facing a new challenge: navigating the various opportunities of fintech. There are two models that are bringing about this change: embedded finance and banking-as-a-service. Leaders need to understand the unique characteristics and differences between both of these concepts.
At first glance, they sound interchangeable. Both enable non-banks to offer financial products. Both are changing the way money moves. And both are vital for digital innovation in many industries.
But scratch the surface, and their differences start to matter—a lot. Especially if you’re building products, platforms or services that rely on financial functionality to attract, retain, and monetise customers.
In this article, we'll cover the difference between embedded finance and BaaS. Why does it matter? And how do you choose the right approach for your business?
In this article, we'll cover the difference between embedded finance and BaaS. Why does it matter? And how do you choose the right approach for your business?
The rise of fintech and the shifting financial ecosystem
Fintech has reshaped customer expectations across industries. From one-click payments to instant credit and smooth digital wallets, users now expect financial experiences to be fast, frictionless, and often invisible.
At the same time, enterprise platforms—from SaaS platforms to insurers and travel brands—are realising the value of embedding financial services directly into their customer journeys.
Underpinning all this is a rapidly evolving fintech infrastructure, powered by financial APIs, white-label banking services, and cloud-native core banking platforms. These tools make it easier than ever for companies to embed finance—or build their own financial services stack altogether.
But with this opportunity comes complexity. Choosing the right architecture can make or break your strategy.
Why the terminology matters
“Embedded finance” and “BaaS” aren’t just industry buzzwords—they point to fundamentally different models. Understanding the distinction can help you:
- Avoid costly technical decisions
- Align internal teams around the right goals
- Select the right partners (and avoid the wrong ones)
- Stay on the right side of compliance
Think of it as understanding the plumbing behind the product. You don’t need to be a developer, but you do need to know how the pieces fit together.
What is embedded finance?
Embedded finance refers to integrating financial services—like payments, lending, or insurance—seamlessly into a non-financial product or platform.
You’ve probably seen it in action already:
- A ride-hailing app offering a driver debit card
- A B2B marketplace allowing net-30 payment terms
- A retailer offering instant “buy now, pay later” credit at checkout
From the user’s point of view, it doesn’t feel like banking at all. And that’s the point.
Business models and benefits
Embedded finance is a way for brands to own the customer relationship—and monetise it more effectively. Instead of sending customers elsewhere for financial services, they become part of the experience.
The benefits?
- Improved UX: Fewer redirects, fewer drop-offs
- Higher revenue: Capture margin from financial products
- Better data: Gain insight into spend, risk, and behaviour
- Stronger loyalty: Increase stickiness by meeting more customer needs
What is banking-as-a-service (BaaS)?
Banking-as-a-service (BaaS) is the infrastructure that powers much of this innovation. It allows fintechs and brands to access core banking capabilities—like account creation, card issuing, or payment processing—via APIs.
BaaS providers work behind the scenes to connect regulated financial institutions with non-banks. They handle the technical heavy lifting: everything from licensing and compliance to KYC and money movement.
In short, BaaS provides the “rails”—so others can build on top of them.
How BaaS powers fintechs and platforms
Imagine you’re launching a neobank. You could apply for your own e-money licence and build a payments stack from scratch. Or you could partner with a BaaS provider who offers regulated financial infrastructure and lets you focus on product, brand, and growth.
That’s the promise of BaaS:
- Faster time-to-market
- Scalable infrastructure
- Embedded regulatory expertise
It’s especially popular with fintechs, but increasingly, platforms in e-commerce, logistics, and even B2B SaaS are using BaaS to launch financial features.
Embedded finance vs BaaS: How they work together
The phrase “embedded finance vs BaaS” sets up a false binary. In reality, they often work hand in hand.
- Embedded finance is the delivery model—how financial services appear within your product or platform.
- BaaS is the enablement layer—the technical and regulatory infrastructure that powers it behind the scenes.
If you’re embedding payments into a checkout flow or issuing branded cards to your users, you’re building an embedded finance experience. But unless you’re a licensed financial institution, you’ll need BaaS providers to handle the plumbing: compliance, payment processing, and core banking functions.
It’s less about choosing one over the other—and more about deciding where your business wants to operate in the value chain.
Deciding your approach: Build, partner, or abstract?
Enterprise leaders don’t need to become fintechs overnight. But they do need to decide how hands-on they want to be when embedding financial features.
Here are three common paths:
1. Abstracted approach
Use a turnkey partner who manages both the front-end experience and the BaaS infrastructure behind it. You focus on brand, UX, and commercial outcomes.
Best for: Marketplaces, gig platforms, insurers, and loyalty programmes that want to offer financial services without owning the regulatory or technical overhead.
2. Modular approach
Pick and choose BaaS components—like card issuing, digital wallets, or payment orchestration—and stitch them together with your own front-end. You manage more of the experience, but rely on BaaS for regulated functionality.
Best for: SaaS platforms or digital businesses with in-house developers and compliance teams who want more control and differentiation.
3. Full-stack approach (most complex)
Build your own infrastructure, obtain licences, and become the regulated provider. This approach gives you full control but involves high cost, time, and risk.
Best for: Fintechs with a core business model tied to financial services.
What to consider before making a move
When deciding how to move forward, consider:
- Use case fit: Are you offering value-added services or building a core financial product?
- Compliance readiness: Do you have the capacity to manage financial regulation in-house?
- Speed to market: Do you need to launch quickly, or are you building for the long haul?
- Customer experience: Do you want full control of UX, or is a white-label approach sufficient?
- Tech resourcing: Can your team support complex integrations and ongoing infrastructure management?
How Edenred Payment Solutions bridges the gap
We provide solutions that deliver tailored embedded financial services that enhance both operational efficiency and customer engagement. By leveraging our expertise, businesses can provide innovative payment options, streamline transactions, and create a more cohesive user experience.
Our bespoke solutions are designed to meet the specific needs of your business, ensuring a perfect fit for your business ecosystem.
Create custom embedded finance experiences, powered by a robust infrastructure and a dedicated team.
Integrate financial products with ease:
- Build your ideal solution - With a single integration, gain access to virtual card capabilities, digital wallet support, e-money accounts, and banking facilities like Faster Payments and SEPA.
- Get to market faster - Accelerate your roadmap with pre-built, compliant financial services and expert onboarding support
- Unlock new revenue streams and efficiencies - Offer value-added services like virtual accounts and card issuing to drive customer retention and monetisation.
Edenred Payment Solutions provides the building blocks for your embedded finance solution
- Accounts & payments
- Card issuing
- Payment processing
Whether you’re looking to launch a new embedded finance feature or build a full-fledged fintech product, Edenred Payment Solutions offers the building blocks to do it - helping businesses avoid the regulatory burden or development delays.
Clarify your path, with confidence
Choosing between embedded finance and BaaS is about picking the right model for your business.
By understanding how they differ—and how they connect—you can make smarter strategic decisions, deliver better user experiences, and unlock new revenue streams.
And if you need support navigating this space, we’re here to help.
Speak to Edenred Payment Solutions today and find out how we can help you deliver customer-centric financial experiences at scale.
Contact us today
We’re here to help you integrate payments services, from flexible payment options to virtual cards and digital wallets, that elevate the user experience and unlock your product’s full potential.
