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SaaS vs. BaaS vs. Banking Software License: Which Is Better?

Dec, 04, 2020
Alex Malyshev

Financial technology has become a catalyst for intensifying competition in the banking industry. Neo-banks are winning market share by serving customers at around one-third of the cost of incumbents. In itself, added cost-efficiency is excellent but not ground-breaking, as IT expenses make up only 6-8 percent of an average bank’s revenue. 

It is the capabilities of modern core banking systems that enable newcomers to disrupt stagnating markets and create value by rapid onboarding and retaining customers. Instant transfers, currency exchange at live markets rates, unlimited accounts, card to card payments, and many other wow-features foster loyalty in a competitive market. 

Source: Next-gen Technology transformation in Financial Services, McKinsey

According to a McKinsey survey, established banks have already taken note: some 70% of banks are exploring next-generation core banking platforms. Incumbents are increasingly concerned about the limitations of their inefficient software incapable of rapid changes and innovation. 

Banks worldwide are moving towards realizing substantial benefits by partnering with FinTechs like to upgrade their core banking software. As challengers and some incumbents move forward, banks remaining on the sidelines have three practical options to start their digital transformation: SaaS (software as a service), BaaS (banking as a service), or to get a banking software license

What is SaaS banking software?

Under the SaaS model, the core banking software is deployed on the service provider’s side, and the client accesses it through a web browser. SaaS banking software does not require the hardware infrastructure of a traditional banking software suite. Clients can compose their banking experience that will be available to them on-demand via an internet connection. 

What is BaaS banking software?

BaaS is an end-to-end process where a client can access and execute technical, business, and financial capabilities from a single service provider over the web. BaaS banking software comes with pre-installed service partners, integrations, and high-security mechanisms such as strong authentication to protect sensitive data throughout the entire process. 

What is a banking software license?

With a banking software license, a client can deploy a service provider’s solution on their infrastructure and customize the solution to their specific needs if they have a dedicated on-site IT team and hardware capabilities. Clients can develop new modules and customize front and back-end as well as add new integrations.

SaaS vs. BaaS vs. Software License

All three options offered by modern FinTechs are ahead of clunky and costly legacy systems used by most banks that require manual software delivery and low straight-through-processing rates. All have their pros and cons in terms of functionality, reliability, and cost-effectiveness that need to be considered before making any decision.

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Under SaaS and BaaS models, clients pay a setup and usually a monthly fee for accessing banking capabilities over the web. For businesses without IT infrastructure and hardware, these models are the most cost-effective start to banking. Depending on a service provider, clients can build a package of features and integrations that they need without paying for unnecessary functionality. 

Although SaaS and BaaS do not require a large budget for the initial phase, the service cost will grow with the increased number of transactions and customers. After some time, these models can lose their cost-efficiency, and the transition to a banking software license model can be more effective.  

With substantial investment into a dedicated on-site IT team and hardware capabilities, clients can purchase a banking software license to entirely personalize their product. Hardware upkeep and maintenance, human capital, and security costs, among others, will result in significant and regular expenses. A considerable upfront cost and regular expenses can be more economical in the long term with enough scale. 

Following successful growth, core banking service providers like can help clients to smoothly transition from SaaS and BaaS models to a banking software license.

Time to market

The ability to roll out products and features quickly is a critical competitive differentiator in the current cluttered marketplace. SaaS and BaaS banking software is not restrained by the monolithic architecture of legacy technology, meaning that products can be launched in a very short time. BaaS banking software has an even faster time to market as it comes with more integrations than SaaS solutions, helping clients to capitalize on the latest developments in the marketplace. 

The banking software license products take considerably longer to launch as they require more customization on-premise. However, with a talented IT team, hardware standing by, and hands-on support from a core banking service provider, time to market can be shortened considerably. 


SaaS and BaaS banking software features and integrations come ready out of the box, and clients can build the product they want before launch. These usually cover the most important features loved by customers and tools for running an efficient banking business. In some cases, service providers can develop and add more features at the client’s request, but otherwise, the capabilities cannot be readily expanded. 

The banking software license solution is not restricted and can be freely and easily customized with new functionality at any time. It is worth noting that following multiple changes to an on-premise core system, the service provider won’t be able to update it to a new version. Although BaaS/SaaS solutions are not as customizable, they are frequently updated by vendors to include the latest advancements and integrations. With time, a customized platform may become outdated when compared to the latest version of SaaS banking software.


Day-to-day support for SaaS and BaaS solutions is usually included in the service provider’s monthly fee. The provider ensures that systems run smoothly using their teams and respond to any queries clients may have. 

Clients with on-premise licensed banking software have to dedicate resources to support their solutions. Service providers offer initial support so that internal teams can accumulate knowledge to speed up maintenance and problem resolution in the future. 


SaaS/BaaS cloud-based banking platforms are hosted on remote servers operated by the service provider. Established vendors invest significant resources to develop and maintain a secure and modern infrastructure because multiple clients rely on their services every day. As a result, cloud banking providers often deliver a higher level of security than on-premise alternatives. 

The security of a banking software license solution depends solely on the client. Depending on the investment into technical infrastructure, the level of security can vary greatly. It is a critical part of an on-premise banking setup that needs to be evaluated before launching any product. enables companies to choose the right model for their needs: SaaS and BaaS banking software or source code with a license. 

If you have a dedicated on-site IT team and hardware capabilities, you can implement the banking platform on-premise. To get the quickest start and high flexibility, then the cloud banking platform is the best way for you.

Contact the team directly to learn more about what type of banking software will be perfect for your business needs.



Is SaaS a Fintech?

As a cloud-based technology, SaaS can benefit fintech companies and banks alike especially in meeting regulatory demands and providing security to their customers. Let's understand the SaaS model before digging deep into its impact on the fintech sector for bringing transformational change.

How does banking as a service work?

Banking as a service (BaaS) is an end-to-end process ensuring the overall execution of a financial service provided over the web. Such a digital banking service is available on-demand and operates within a set time-frame.

Is banking a service?

This is where Banking as a Service comes in. Banking as a Service (or BaaS for short) describes a model in which licensed banks integrate their digital banking services directly into the products of other non-bank businesses.

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