Open banking frameworks also rely on data protection and consent management regulations, to prevent misuse of on of the most precious asset that the consumers have in a digital economy, “Data”.
Banking as a Service is a term used to describe a distribution model, where banking institutions and third party financial tech companies collaborate, while leveraging the regulated open banking framework, to offer value added services to consumers in the country or internationally. A great example is Apple allowing its customers to open a savings account, which is backed by Goldman Sachs. Goldman Sachs, using Apple’s ecosystem and distribution network reached millions of users which they probably would have had to make huge investments to acquire.
Embedded finance is another term that shows up consistently in these conversations, and very often used synonymously with banking as a service. I see BaaS as a sub set of Embedded finance, with embedded finance covering other aspects of finance beyond traditional banking, insurance, wealth management etc. The concept though, remains same.
Most likely, these frameworks, distribution and business models will lead to something that is much more widely accepted, and adds true value to the world economy. But the key remains this,”democratization of innovation”, and spreading it beyond the boundaries of traditional financial institutions.
Open banking is just one of the tools that help enable banking as a service.
There are a lot of other ingredients to accomplish a BaaS based business model, open banking is just one of them.
PISP and AISP on its own mean nothing to a customer. It is the value that these services add to the overall experience.
I understand that difference between #embeddedfinance , #baas and #openbanking seems blur, but I see it as an ecosystem of frameworks that is evolving and all elements have their place in it.
If one considers the intents behind these frameworks, the image become a bit more clear. Open banking as a concept was intended to “Open up” the financial ecosystem to financial technology stakeholders besides regulated financial institutions, like banks, insurance companies etc.
The fundamental idea, “allow third party organizations to access banking consumer data and offer services” has been around for a long time in many countries, even if it was not called open banking. Europe was where the regulated concept took shape, in form of Payment service directives(PSD1, PSD2, and now PSD3), which now is the benchmark for rest of the world to build its open banking framework on.
https://ec.europa.eu/commission/presscorner/detail/fr/MEMO_15_5793