October 12, 2022

Banking as a Service vs. Payments Platforms: What's the Difference?

Key Takeaway

Payments platforms offer faster implementation and lower resource requirements compared to Banking as a Service, often taking days to set up versus quarters for BaaS. In our experience, payments platforms with program management provide the best balance of functionality and simplicity for most businesses.

Quick Navigation

Key Terms
What is Banking as a Service
What is a Payments Platform?
Payments Program Management
BaaS vs Payments Platform Comparison
Branch: Payments Platform + Platform Management
Benefits of Payment Platforms
Frequently Asked Questions

Key Terms

Banking as a Service (BaaS): Technology platforms that offer banking capabilities in conjunction with licensed banks, allowing companies to integrate financial services without obtaining their own banking license.
Payments Platform: Turnkey solutions that enable companies to quickly integrate payment capabilities with minimal development resources and faster time to market.
Program Management: Comprehensive service handling all aspects of financial services integration including card networks, issuing banks, user experience, and dispute management.
Interchange Fee: Fee paid by merchants to card issuers when customers make purchases using payment cards, typically ranging from 1-3% of transaction value.
White-glove Solution: Full-service offering where the provider handles all technical implementation and ongoing management with minimal client involvement.

Continuing our series of how to embed payments and a card program into your product, this week we're taking an in-depth look at the differences between Banking as a Service platforms and payments platforms.

What is Banking as a Service?

Banking as a Service (BaaS) platforms offer technology capabilities in conjunction with a licensed bank, allowing you to integrate banking services into your product. Using BaaS, your company can leverage a platform's banking capabilitiessuch as payment processing, lending, debit or credit cards, and moreall within your product's customer experience.

<� Core Features

Payment processing integration
Lending capabilities
Debit and credit card issuance
Account management tools
Regulatory compliance support

<� Business Benefits

Drive customer loyalty and engagement
Integrate payments without banking license
Leverage existing banking infrastructure
Access to financial services ecosystem
Comprehensive banking functionality

Businesses are turning to BaaS in an attempt to drive customer loyalty and engagement, since they know payment capabilities have become such an integral component of driving growth. By working with a BaaS platform, a company can adopt payment capabilities without getting a banking license of their own.

What is a Payments Platform?

Going with a BaaS platform is not your only option for integrating payments into your product. There are also payments platformsturnkey, white-glove solutions that can help you quickly catch up to your competition without the cost in time, money, and resources that a BaaS platform often requires.

� Key Characteristics

Turnkey, ready-to-deploy solutions
White-glove implementation support
Faster time to market
Lower resource requirements
Simplified integration process

=� Cost Advantages

Reduced development costs
Lower implementation timeline
Minimal internal resource allocation
Predictable pricing models
No hidden infrastructure costs

What is Payments Program Management?

When evaluating your payments platform options, note that some of them also offer program management. Program management will take care of all aspects of these integrated financial servicesthings like the relationships with the card networks and issuing banks, end user experience and support, card inventory, and dispute management.

Program Management Components

1. Card Network Relationships

Managing partnerships with Visa, Mastercard, and other payment networks for seamless transaction processing.

2. Issuing Bank Coordination

Handling relationships with banking partners for card issuance and account management.

3. End User Experience

Providing customer support, account management interfaces, and user experience optimization.

4. Operational Management

Handling card inventory, dispute management, compliance, and ongoing program operations.

All of these separate components are considerations you'll need to factor into your decision. Do you want to be in charge of all of these moving parts? Or do you want someone who can help you implement a payments program while handling these components for you?

How Do BaaS and Payments Platforms Compare?

Feature	Banking as a Service (BaaS)	Payments Platform
Implementation Time	Quarters (3-12 months)	Days to weeks
Development Resources	High engineering requirements	Minimal development needed
Cost Structure	High upfront + ongoing costs	Lower upfront investment
Customization Level	High customization possible	Moderate customization
Operational Complexity	High - manage many components	Low - turnkey solution
Speed to Market	Slow	Fast
Ongoing Management	Requires dedicated resources	Handled by provider

Payments Platform + Program Management in One

Branch is a free payments platform and program management option in one. The reason we're free to both companies and workers is because we collect revenue via interchange. Every time a Branch user swipes their Branch card to make a purchase, the merchantthe one receiving payment from the workerpays what's called an interchange fee, and part of that fee comes back to Branch.

How Branch's Revenue Model Works

This interchange-based model allows Branch to offer comprehensive payment services at no cost to businesses or workers, making financial inclusion accessible while maintaining a sustainable business model.

What Are the Benefits of Going with a Payments Platform?

With a payments platform and program management option, your team isn't drained of resources, money, or time. You can create an experience that attracts, delights, and retains workers with financial benefits, discounts, rewards, and other perkswithout having to manage it yourself or be burdened with hidden pass-through costs.

=� Out-of-the-Box Solution

A payments platform that includes program management is essentially a product that's ready to go without the need to engineer or develop a thing, unlike a BaaS.

=� Fastest Speed to Market

Payments platforms can get set up as quickly as days vs. quarters that most BaaS providers take.

<� Limited Distractions

When working with a payments platform, your company doesn't need to manage anything but disbursements. Fraud, risk, legal/compliance, KYC, support, additional pass-through costs&all of that is off your plate.

=� Resource Efficiency

Focus your engineering and product teams on core business features rather than payment infrastructure development.

=� Risk Management

Provider handles compliance, fraud prevention, and regulatory requirements, reducing your operational risk.

=� Scalability

Platform infrastructure scales automatically with your business growth without additional engineering investment.

Frequently Asked Questions About BaaS vs Payments Platforms

What is Banking as a Service (BaaS)?

Banking as a Service platforms offer technology capabilities in conjunction with a licensed bank, allowing companies to integrate banking services like payment processing, lending, and cards into their products without obtaining a banking license.

What is a payments platform?

Payments platforms are turnkey, white-glove solutions that help companies quickly integrate payment capabilities without the cost, time, and resources that BaaS platforms typically require.

Which is faster to implement - BaaS or payments platforms?

Payments platforms are faster to implement, often taking days versus quarters that most BaaS providers require for setup and integration.

What is payments program management?

Program management handles all aspects of integrated financial services including relationships with card networks, issuing banks, end user experience, support, card inventory, and dispute management.

Which Solution Is Right for Your Business?

As we'll discuss, however, neither a BaaS platform or a payments platform will be right for 100% of all companies. The best way to add a payments and card program to your business will depend on your unique needs.

In our experience, payments platforms with program management offer the optimal balance of functionality, speed, and resource efficiency for most businesses looking to embed financial services. They provide faster time to market, lower development costs, and comprehensive operational support.