Embedded Finance: Building Banking-as-a-Service Platforms

Embedded finance is reshaping how financial services are distributed. We examine the technical architecture behind Banking-as-a-Service platforms and the integration patterns that power embedded finance.

The Embedded Finance Revolution

Embedded finance allows any company to offer financial products within their existing customer experience. A retailer offers point-of-sale financing. A gig economy platform provides instant payout accounts. A SaaS company extends credit to customers.

Behind these experiences are Banking-as-a-Service (BaaS) platforms that provide the regulated infrastructure non-financial companies need to offer financial products.

The BaaS Stack

┌────────────────────────────────────────────────────────────────┐
│                      BaaS Platform Stack                        │
├────────────────────────────────────────────────────────────────┤
│                                                                 │
│  ┌─────────────────────────────────────────────────────────┐   │
│  │                    Brand Layer                          │   │
│  │         (White-label UIs, customer-facing apps)         │   │
│  └─────────────────────────────────────────────────────────┘   │
│                              │                                  │
│  ┌─────────────────────────────────────────────────────────┐   │
│  │                     API Layer                           │   │
│  │     Accounts │ Cards │ Payments │ Lending │ Identity    │   │
│  └─────────────────────────────────────────────────────────┘   │
│                              │                                  │
│  ┌─────────────────────────────────────────────────────────┐   │
│  │                  Core Banking Layer                     │   │
│  │       Ledger │ Product Engine │ Compliance │ Fraud      │   │
│  └─────────────────────────────────────────────────────────┘   │
│                              │                                  │
│  ┌─────────────────────────────────────────────────────────┐   │
│  │              Banking Infrastructure                     │   │
│  │    Bank License │ Scheme Membership │ Payment Rails     │   │
│  └─────────────────────────────────────────────────────────┘   │
│                                                                 │
└────────────────────────────────────────────────────────────────┘

Key Architectural Components

Multi-Tenant Ledger

The core of any BaaS platform is its ledger—the source of truth for all financial positions. Requirements:

• Multi-tenancy: Strict isolation between customers (programs)
• Immutability: Append-only transactions for audit trail
• Real-time: Instant balance updates for customer experience
• Scalability: Handle millions of accounts and transactions

// Double-entry ledger transaction
{
    "transaction_id": "txn_abc123",
    "program_id": "prog_retailer",
    "entries": [
        {
            "account_id": "acc_customer_123",
            "direction": "debit",
            "amount": 5000,
            "currency": "GBP"
        },
        {
            "account_id": "acc_settlement_pool",
            "direction": "credit",
            "amount": 5000,
            "currency": "GBP"
        }
    ],
    "metadata": {
        "type": "card_purchase",
        "merchant": "Amazon UK"
    }
}

Product Configuration Engine

BaaS platforms must support diverse product configurations:

• Account types (current, savings, e-money)
• Fee structures (monthly, per-transaction, tiered)
• Interest rates and calculations
• Limits and controls
• Feature toggles (FX, international payments)

Configuration should be self-service where possible, allowing customers to adjust products without platform code changes.

Program Isolation

Each customer (program) must be isolated:

• Separate configuration
• Independent compliance settings
• Isolated reporting and analytics
• Customer-specific webhooks and integrations

API Design for BaaS

BaaS APIs must be:

Comprehensive

Cover the full lifecycle:

• Customer onboarding and KYC
• Account creation and management
• Card issuance and controls
• Payments and transfers
• Reporting and statements

Consistent

Standard patterns across all endpoints:

• RESTful design with predictable URLs
• Consistent error formats
• Standard pagination
• Idempotency for mutations

Webhook-Driven

Real-time events for critical updates:

• Transaction authorisations
• Account status changes
• KYC decision notifications
• Card lifecycle events

Compliance at Scale

BaaS platforms face unique compliance challenges:

Regulatory Responsibility

The bank (or e-money institution) remains ultimately responsible for compliance, even when customers are onboarded through partners. This means:

• Robust KYC orchestration
• Transaction monitoring across all programs
• Suspicious activity reporting
• Regular program oversight and audits

Program Onboarding

Before launching a new embedded finance program:

• Due diligence on the partner
• Understanding their use case and customer base
• Configuring appropriate controls
• Training partner staff on compliance obligations

Card Issuing

Card issuance is a common BaaS capability:

• Physical cards: Manufacturing, personalisation, fulfilment
• Virtual cards: Instant issuance for digital use
• Tokenisation: Apple Pay, Google Pay provisioning
• Controls: Spending limits, merchant categories, geographic restrictions

This requires scheme membership (Visa, Mastercard) or partnership with an existing principal member.

Integration Patterns

SDK-First

Provide SDKs in major languages (Python, Node, Ruby) that handle:

• Authentication
• Request signing
• Retry logic
• Webhook verification

Sandbox Environment

Full-featured sandbox for integration development:

• Simulated banking rails
• Test card numbers
• Configurable scenarios (decline, delay, error)

Conclusion

Building a BaaS platform requires deep expertise in both banking operations and platform engineering. The technical architecture must support multi-tenancy, real-time operations, and comprehensive APIs while maintaining the compliance infrastructure that regulated financial services demand. For companies that get this right, the reward is powering the next generation of embedded financial experiences.