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One man's Vulnerable Market is another man's Financial Inclusion / Democratization of Financial Services / Disruption Mantra / Noble Cause / Path to Frothy Valuation. Take your pick.

@GabrielHopkins: Keen to know how you stumbled upon this 2014 post in 2021! According to the quick-and-dirty study done by my company, many blogs are receiving traffic for some their posts 3-4 years after they were published and I'm keen to know the source of traffic after so many years - in this case 7 years. 

The originators of subprime mortgages went laughing all the way to the bank in 2008. So will Visa. Can't say the same thing about the guy who is left holding the BNPL bag if and when the music stops. 

@MatthiasBiehl:

I get your example. TY.   

Well before Open Banking, there have been third party A2A RTP payment apps like PayM that work off FPS rails provided by banks. They may use custom interface / scraping tech etc. but, functionally, they're no different from the current breed of  A2A RTP apps based on Opening Banking / PSD2 API. So, I wonder if payments is an exception that proves the rule.  

Can you think of any other app that vitiates my distinction between Open Banking and BaaS?

Another way of seeing this is, maybe there's something unique about payments that there can be no payments BaaS at all? Can you think of any? I can't. AFAIK, any third party payment app can work only if payer already has prior account with the bank that processes the payment. No third party app can let the payor to create a bank account on the fly within itself. So, payments is not a good use case to illustrate the difference between Open Banking and BaaS? 

Nice post. 

My $0.02:

• Open Banking is sharing of data with third party app / website.
• BaaS is sharing of data and functionality with third party app / website.

I know this description is not 100% accurate but I'd like to think that it makes the distinction easier to communicate to the mainstream audience.

While we're at it, here's a question I recently read on Twitter: Is BaaS the same as good 'ole Whitelabeling? When I read it, I wasn't sure of the answer. After reading your post, I am. But I'll leave it to you to weigh in first! 

Regs have collected hundreds of millions in fines from megabanks for violation of AML rules but, AFAIK, they have not imposed a ceiling on number of new customers they can onboard. Wondering why they're doing so on a neobank for the same tresspass. Is it due to lobbying by big banks or because they're not happy with the mere millions in fines they collected from N26?

More competition is supposed to lower lower prices. The credit card industry has resolutely defied that common wisdom. There are literally tons of credit card issuers and credit card acquirers but APR has remained steady in the 24-36% range and MDR, in the 2-3% range, all thru' the industry's existence for 50+ years. 

Now that Plaid has launched A2A payments, as foreseen by the regulator when it blocked the acquisition of Plaid by Visa, we will see how much pressure its competing payment service puts on credit card APR and MDR.

Sorry but, probably in the enthusiasm to shill its own "real-time data enrichment solutions", this post misses a vital difference re. BNPL.

Unlike A2A and Credit Card / Debit Card providers, BNPL providers are VC funded and can absorb losses for a long time. More than anything else, that differentiator of BNPL industry will shape its response to Fraud.

Pay in full, tighter credit check... In other words, Klarna is becoming a good ole credit card. 

New regulator? LOL.

Crypto / DeFi was supposed to be a separate financial system that was impervious to regulation and censorship. If only the actual product had come close to its GTM story, we wouldn't be talking about *any* regulator for this space, let alone a new and separate regulator. Sigh.