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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteThere is no single “platform” that makes up the US financial system. What people call a platform-based system is a stack of layers. A regulated bank or credit union holds the account. A core system keeps the records. A payment rail moves money between institutions. A customer-facing app, often run by a different company, sits on top. Data connections can link that app to accounts held elsewhere. Each layer can be run by a different firm. The bank stays legally responsible for what it outsources.
This guide walks through the layers in the order money and data actually travel. It uses FedNow as the worked example of a payment rail, and it explains where speed and product variety come from and where the risks concentrate.
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The layers at a glance
The table is a simplified model for reading the market. Real arrangements combine or split these roles in different ways, and one firm may perform several of them.
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| Layer | What it does | Typical examples | Who a customer usually sees |
|---|---|---|---|
| Institution and account | Holds the deposit relationship and carries the regulatory obligations | Banks, credit unions | Often the bank’s name in disclosures; sometimes only the app’s brand |
| Core and back-office systems | Process transactions and keep account records | Core banking systems and ancillary services | Nobody. This layer is invisible to the customer |
| Payment infrastructure | Moves and settles funds between institutions | FedACH, Fedwire Funds, FedNow, private-sector networks | Nobody directly. It shows up as a “send” or “pay” option |
| Data and API connections | Let permissioned third parties read account data or initiate services | Aggregators, bank APIs | A “link your account” screen |
| Customer-facing platform | Marketing, app or website, support, product bundling | Bank apps, fintech apps, embedded-finance products | The app itself |
The Federal Reserve’s own payment systems overview shows why the layers matter. It lists institutional payment services alongside private-sector options, and none of them is an app a consumer downloads.
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Layer 1: The bank or credit union that holds the account
Deposit accounts are held at banks and credit unions. In a bank and third-party arrangement, the third party may market or distribute the product and provide the app or other route customers use to reach it. Depending on the structure, one or more third parties can also do any of the following, according to the joint statement from the Federal Reserve Board, the FDIC and the OCC:
- maintain the transaction system of record
- process payments
- perform assigned compliance tasks
- service accounts
- handle customer contact and disputes
What “banking as a service” and “embedded finance” mean
These labels describe arrangements in which a nonbank brand offers a bank product through a partner institution. The labels do not tell you which firm holds the deposit or who performs each function. Two products that both claim to be banking as a service can allocate those jobs very differently, so the useful question is always about the actual roles.
Outsourcing does not move the obligation
The agencies state it directly. In their joint statement of July 25, 2024, the Federal Reserve Board, FDIC and OCC wrote: “A bank’s use of third parties to perform certain activities does not diminish its responsibility to comply with all applicable laws and regulations.” The same statement says it reemphasizes existing guidance rather than creating new requirements. A platform can run the customer experience and even much of the back end under contract, but the chartered institution stays accountable.
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Layer 2: The core banking system
A core banking system is the back-end technology that processes daily transactions and updates account and financial records, according to the Federal Reserve Bank of Kansas City’s February 28, 2024 briefing. Core providers may handle primary tasks such as customer and account management, deposits and withdrawals, loan processing, and finance and accounting. Ancillary functions, such as payments, interfaces to bank products or customer support, may come from the core vendor, another provider, or the institution itself. Institutions mix in-house and outsourced services in different ways.
Why modernizing is harder than it sounds
The briefing notes that legacy systems can be difficult to change because payment processing and other ancillary services may be integrated with them. It describes three broad approaches:
- Full replacement of the core system.
- Component replacement, swapping individual modules.
- Augmentation, keeping the existing core and adding capabilities around it.
The choice depends on the institution’s services, its dependence on providers, the complexity involved and its resources. Modernization is therefore not a single move to the cloud, and any new payment or app feature has to work with whatever core sits underneath.
Layer 3: Payment rails, with FedNow as the example
A rail is the infrastructure that moves and settles money between institutions. The Federal Reserve provides several, including FedACH, Fedwire Funds, Fedwire Securities and FedNow, and they operate alongside private-sector networks and services, per the Federal Reserve’s payment systems page.
What FedNow is
The Federal Reserve describes FedNow as an instant-payment infrastructure for eligible depository institutions. Through participating institutions, consumers and businesses can send or receive payments in real time, around the clock, every day of the year. Initial uses include account-to-account transfers and bill pay.
What FedNow is not
The Federal Reserve’s FedNow FAQ (last updated July 17, 2024) says plainly: “There is no FedNow app.” Banks and credit unions expose FedNow-enabled features through their own mobile apps, websites or business-payment interfaces. The Federal Reserve does not offer individual accounts. The FAQ also gives $545 million as the Federal Reserve’s investment to implement the service. That is a historical build-cost figure from 2024, not a fee, a per-institution cost or a measure of payment volume.
What this means in practice
- Access depends on the institution. A customer can use FedNow-based features only if their bank or credit union participates and chooses to offer them.
- A transfer needs capable institutions at both ends. It follows that the receiving institution’s participation matters as much as the sender’s. This is an inference from how an institution-to-institution rail works, not a stated rule of the service.
- Between the rail and the customer there is often a vendor. Integration providers help institutions connect. The Federal Reserve’s Innovator Exchange, for example, profiles Open Payment Network as an API-based FedNow integration provider. The exchange states that inclusion is not a Federal Reserve recommendation or endorsement.
FedNow participant and provider lists change over time, so check the Federal Reserve’s current listings before relying on whether a given institution is connected.
Layer 4: Data connections and APIs
Many platform services need to read a customer’s account data. The Federal Reserve Bank of Boston’s whitepaper, Modernizing U.S. Financial Services with Open Banking and APIs, describes US open banking as a mix of public and private developments. It dates from about 2021, so treat it as conceptual background rather than a current legal reference. It contrasts two methods that are often lumped together:
| Method | How it works | Main concern |
|---|---|---|
| Screen scraping | An aggregator may use the customer’s online banking credentials to log in and collect data | Credential sharing |
| API-based access | The institution exposes a standardized interface that an app connects to on the user’s behalf | Interoperability gaps; the cost and difficulty of modernizing legacy systems |
The paper says APIs are widely viewed as the more secure and standardized route. It also notes that interoperability gaps and the expense of modernizing legacy infrastructure hold back adoption. That ties this layer back to the core-system problem above.
The CFPB’s personal financial data rights effort
In prepared remarks on the Personal Financial Data Rights Rule, then-CFPB Director Rohit Chopra described potential uses of consumer-authorized data, including checking-account cash-flow data for loan underwriting and pay-by-bank options. He also described limits on using permissioned data for unrelated purposes and protections for collection, storage, transfer and deletion.
Those remarks are an archived 2024 speech. They do not settle the rule’s current legal status or compliance dates, and this article does not state either. If you are building or buying a product that depends on this rule, confirm its status with the CFPB’s current materials or counsel.
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The scenario below is illustrative. It is not a description of any real product.
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- A customer opens a finance app run by a nonbank company. The app is the marketing and interface layer.
- The account behind it is a deposit account at a partner bank. The bank is the regulated institution, and its charter and name appear in the account terms.
- A vendor maintains the ledger that records the balance. This could be the bank’s core system or a separate system of record, and the bank needs timely access to those records either way.
- The customer sends money. A payment processor connects the bank to a rail such as FedNow, if both banks participate, or to another network.
- The customer links an outside account to see a combined balance. The app connects through an API or, in older arrangements, through credential-based access.
- If something goes wrong, such as a wrong payment or a locked account, someone must handle the complaint. The contract may assign that to the app company, the bank or a vendor. The bank still carries the regulatory obligation.
Where the benefits come from
- Speed. Instant rails like FedNow let participating institutions offer around-the-clock, real-time transfers and bill pay, instead of waiting on batch cycles.
- Product variety. Banks can reach customers through distribution partners and use specialist vendors instead of building every capability in-house.
- Data-enabled services. Permissioned account data can support uses such as cash-flow-based underwriting and pay-by-bank, as the CFPB remarks describe.
Where the risks concentrate
The joint agency statement supports responsible innovation, but it also describes arrangements that can carry elevated risk. The areas it names are:
- a bank depending on third parties for significant deposit operations
- fragmented responsibilities among the parties
- limited access to records, including the bank’s ability to get them promptly
- reliance on a third party to carry out compliance work
- security vulnerabilities, fraud or privacy incidents at a connected provider
The more roles that are spread across firms, the more important clear contracts, monitoring and the ability to recover records or operations if a provider fails.
Questions to ask about any platform-based financial product
The agencies do not publish this as a consumer checklist. It is a reader’s tool built from the risk areas above.
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- Which bank or credit union holds the deposit, and whose charter backs the product?
- Does the app’s brand disclose that bank clearly in the account terms?
- Who keeps the authoritative account records, and can the bank retrieve them quickly?
- Which firm processes payments, and over which rails?
- Do both the sending and receiving institutions support the instant-payment service you want to use?
- Who handles errors, disputes and complaints?
- Does the app connect to other accounts through an API or by taking your credentials, and what data does it keep, for how long?
- How does the bank monitor its vendors, and what happens to accounts and records if a provider fails?
Comparing architectures on the points that matter
| Question | What to look for |
|---|---|
| Account and regulatory role | Which regulated institution provides the underlying service, and what the platform company actually does |
| System of record | Who keeps the transaction records and whether the institution can access them promptly |
| Payment function | Which rails and use cases are supported, and whether both ends participate |
| Data connection | API or credential-based access, and the scope and duration of permission |
| Core modernization path | Full replacement, component replacement or augmentation |
| Oversight and resilience | Allocation of responsibility, vendor monitoring, complaint handling, fraud controls, security and privacy |
The Bottom Line
Think of the US financial market as a stack, not an app. The bank or credit union carries the obligations, core systems keep the records, rails like FedNow move the money, and platforms and data connections shape what the customer sees. When you evaluate any product, work out which firm performs each role, because the brand on the screen rarely tells you.
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