A closer look at Citi’s strategy for growing its TTS business in the 2025 BaaS landscape

Citi CEO Jane Fraser called Citi’s Treasury and Trade Solutions (TTS) ‘a thing of beauty’ during the Q3 2023 earnings call. She explained that this business aligns well with Citi’s core strengths: its global reach, local insight, and capability to support clients across markets.

TTS solutions enable fintechs, platforms, and corporates to access the bank’s global banking infrastructure through API-driven solutions and integrated partnerships. It has been a consistent growth engine for the bank, which reinforces its strategic importance.

Two years later, it remains just that.

Among its many roles, Citi’s TTS arm is helping the bank grow its presence in Banking-as-a-Service (BaaS) and meet rising demand for embedded financial services.

I spoke with Scott Southall, Head of Banking as a Service at Citi, about the bank’s latest initiatives within its TTS division, the key BaaS trends expected to shape the second half of 2025, and how Citi is adapting its strategy in response to those trends.

Recent moves and areas of focus within the TTS division: “Over the past few years, we have seen more businesses move online and connect directly with customers through marketplaces and online platforms, rather than relying on traditional sales methods,” says Scott Southall, Head of Banking as a Service at Citi.

He believes that this trend will continue and increasingly become the norm over the years. “We have particularly seen increasing demand in specific areas like gig economy payouts, fintech collections, or direct-to-consumer sales,” he notes. “Clients are looking for fully integrated solutions across the entire continuum of accept, hold, and pay as they look to scale quickly and globally, and we are focused on creating solutions that are fully embedded, real-time, always on, and able to handle large volumes of transactions.”

Citi has been collaborating with fintech clients to co-create some of its e-commerce solutions, addressing clients’ needs. The bank’s end-to-end digital payment acceptance solution, Spring by Citi, is live in 23 markets, and its cloud-enabled digital commerce solution, Payments Express, is functional in 20 markets. 

“Then we have Banking-as-a-Service, which allows its e-commerce clients to serve their merchants and seller customers,” shares Southall.

He highlights the strategy that was partially outlined during Citi’s Services Investor Day last year: the bank is assessing integrated solutions to better serve global sellers operating on platforms and marketplaces. 

A core component under consideration is the integration of capabilities to support global sellers on platforms and marketplaces through a virtual IBAN, enabling clients to manage the full payments lifecycle, from accepting funds to holding balances and making payments. Virtual IBANs support this range of use cases, often serving clients’ end-users, such as merchants selling online via payment service providers (PSPs) or marketplaces.

This strategy is driven by the evolving needs and expectations of sellers. With small to mid-sized sellers driving much of today’s marketplace growth, Southall says they’re increasingly looking to platforms, marketplaces, and PSPs to play a more active role in shaping their financial solutions and strategies.

Global BaaS trends anticipated for Q3 and Q4 2025

Southall shares that he is closely watching two key developments on the regulatory and infrastructure side for BaaS in the coming months:

i) First, he is seeing an increasing focus from regulators on virtual IBANs and the resulting impact on financial crime management. 

“Virtual IBANs are often at the heart of many BaaS solutions,” he adds.

Europe has emerged as a key region for the growth of virtual IBANs, with regulatory developments playing a central role. Many individual markets are now following the European Banking Authority’s (EBA) direction, which typically calls for virtual IBANs to be reported in bank account databases, alongside other compliance measures.

Southall notes that this shift could significantly impact banks and PSPs offering virtual IBAN services, particularly those that have not invested in capabilities for user identification, data reporting regarding underlying Virtual IBAN users, and regulatory compliance.

“With the increasing focus by regulators, there may be additional regulatory focus and licensing requirements,” he says.

He’s already seeing regulatory scrutiny continue to intensify, especially as the EU advances major reforms such as PSD3 and PSR1, which are raising the bar for licensing standards and compliance expectations.

ii) Second, Southall signals the expanding call for clearer digital asset regulations in the US as an encouraging sign. One of the significant pieces of legislation currently progressing in Washington, D.C. is related to stablecoins, and he believes it has the potential to impact global payment systems.

He asserts that stablecoins are particularly well-suited for BaaS solutions because of their round-the-clock availability and fast settlement times. These features make them well-suited for use cases like marketplace payments, where customers may choose to pay using stablecoins. They may also enable gig economy payouts — for example, allowing a software developer in a high-volatility currency region to receive instant, cross-border compensation upon completing a task.

With increasing regulatory momentum and the continued integration of digital assets into traditional financial institutions, Citi anticipates rising demand for stablecoin-enabled payment solutions.

“With sustained client interest, banks are well-positioned to take on a larger role in the digital asset ecosystem, providing customers with the security and trust of established institutions,” notes Southall.

The next steps for Citi in the evolving BaaS landscape

Citi’s TTS division is expanding its efforts in the BaaS space, focusing on use cases such as gig economy payouts and fintech collections.

“We are also taking a long-term view on issues, like virtual IBAN regulation, and how we create future-proof platforms, like our Payer ID Engine for fintech collections,” shares Southall.

The Payer ID Engine is a global platform that provides Citi’s fintech clients with virtual IBANs for non-card e-commerce collections. This fintech collection service allows clients to sell and collect globally without a traditional bank account. “It is a game changer for small and medium-sized merchants who do not have the staff or internal finance capabilities to access overseas banking services on their own,” notes Southall. 

Citi’s Payer ID Engine also plays a key role in supporting compliance by capturing data related to underlying Payer ID assignees — a critical requirement as regulatory reporting obligations for virtual IBANs continue to evolve. Currently deployed in 11 markets, the solution is set to expand further in 2025.

With possibilities come risks: Even with a clear roadmap, Citi and other institutions encounter both opportunities and challenges while adapting to changing BaaS dynamics. Southall acknowledges that this is especially challenging given the complexity of navigating multiple payment systems and regulatory frameworks across Citi’s global footprint.

For Citi, making it work comes down to a few important things, such as:

• Client co-creation to define design principles and requirements
• Comprehensive API enablement and end-to-end design
• Highly available and scalable application architecture
• Alignment with risk management and compliance partners, as well as controls embedded in technology

“We are energized by the opportunity we see in this space and look forward to making continued progress on this front in collaboration with our clients,” he says.

[Sidebar]: How banks are making embedded finance work within their existing structures

Banks are stepping into the embedded finance space with both feet. From payments to point-of-sale lending, traditional players like J.P. Morgan and Citi are developing infrastructure, APIs, and partnerships that embed financial services directly into platforms and marketplaces.

J.P. Morgan, for instance, launched a full-stack B2B payments solution aimed at helping North American merchants streamline operations across channels. They’ve also built developer tools and embedded banking services tailored to businesses looking for smooth cash management. 

Citi, meanwhile, has been rolling out embedded lending products like Citi Pay Credit and Installment Loan, letting shoppers access financing right at checkout. Making integration as smooth as possible for merchants.

The two big banks take slightly different paths to the same goal. J.P. Morgan leans into building in-house tools and infrastructure, while Citi leans on strategic partnerships with fintechs like ChargeAfter and FreedomPay. What they have in common is a focus on offering flexible APIs, simplified onboarding, and payment solutions that fit into a merchant’s existing setup without much friction.

Both banks are using embedded finance to modernize their offerings, but more importantly, to unlock new revenue streams and strengthen client relationships. And while they still compete with fintechs — and increasingly, with each other — there’s also a growing sense that collaboration, not just innovation, is what helps drive real progress in this space.