Three top tips for businesses considering Banking-as-a-Service

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Banking-as-a-Service (BaaS) is transforming the way financial products are delivered, powering businesses and brands to offer banking solutions directly to customers.

BaaS-enabled embedded finance can solve friction points on the customer journey, delivering contextual financial products at the point of need. In turn, it has the potential for businesses to reap the benefits of increased revenue and stronger customer loyalty.

But, those benefits can only be realised if a strategic approach is taken; successful BaaS projects require a clear understanding of the customer and their pain points in order to prioritise the right financial products. 

So, for any business considering a move into the BaaS space, here are three top tips.

  1. Focus on customer needs.

Success with BaaS requires a razor-sharp focus on the customers’ needs. That means starting with some key questions: what are the friction points within your customer journey? What financial challenges do your customers face? How could embedded finance remove that friction and solve those pain points?  

The answers to those questions will go a long way to determining which solutions to focus on for the  BaaS project.

Take the example of Buy Now, Pay Later (BNPL) – BNPL is now commonplace among retailers and brands because it gives customers choice at checkout to pay now or defer and split payments. The end result is improved conversion for the vendor, as well as a higher chance of purchasing higher-priced items. It also fosters greater loyalty between business and customer.  

Did you know, two in five European consumers say they will only stay loyal to retailers and brands that offer embedded finance products like BNPL within the customer journey? Read more here.

  1. Regulation and compliance are pivotal.

Banking products are highly regulated, and by extension, BaaS solutions must comply with the same rules and regulations. 

BaaS providers can have very different licences, which determines the types of products they can offer, as well as their regulatory and compliance expertise. This warrants careful examination by prospective BaaS adopters to understand how a provider is licensed.

For instance, some BaaS providers offer Electronic Money Institutions (EMI) licences, limiting the financial products they can offer to payments. By contrast, Vodeno has access to a full banking licence via Aion Bank, which allows us to supply a complete range of solutions, including the ability to hold deposits, offer savings accounts and enable lending solutions. 

Further to licensing, businesses need to consider a BaaS provider’s regulatory compliance expertise to ensure the solutions are delivered in a fully compliant way. Anti-fraud, anti-money laundering, know your customer – adopters must rely on their BaaS provider to execute all these essential regulatory tasks. This becomes more important as BaaS projects scale, potentially spanning different territories governed by different regulations. 

  1. A roadmap for scalability.

Scalability should never be taken for granted. Many BaaS adopters will start small – embedded payment solutions are often a way to test the BaaS waters before then implementing additional financial products into the customer journey. So, a roadmap for BaaS scalability is important. 

Scalability is reliant on adopters partnering with a BaaS provider that can deliver the right blend of technology, licensing, regulatory expertise, as well as strategic Go-to-Market support. 

Without all those boxes ticked, issues are almost certain to arise, and a provider’s limitations will hinder BaaS deployments scaling over time.

Click here to find out how Vodeno goes the extra mile to ensure BaaS success for partners

Laying the groundwork for success

Businesses considering BaaS should always start with a clear strategy and use case for which embedded finance products will be brought to market.  

Unquestionably, finding the right BaaS provider holds the key. 

Hopefully, these three top tips help any business exploring BaaS opportunities to lay the groundwork for a successful BaaS implementation. The key takeaway: look for providers that are able to offer a full end-to-end service – technology, banking licence and regulatory and compliance expertise – to help strategise, implement and scale your BaaS solutions. 

Do you want to learn more about how Banking-as-a-Service and embedded finance can transform your business or industry? Then get in touch with Vodeno today.

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