• Nikhil Sengupta, Global Sales Director at Vodeno


• 12.01.2023 05:45 am
#banking

Today, Banking-as-a-Service makes it possible for any brand to offer financial products directly to their customers – from buy-now-pay-later (BNPL) to the issuance of cards and fast and efficient payment solutions. Ultimately, this allows brands to solve key pain points and make the customer journey a better experience.

According to research from McKinsey, the popularity of BaaS is predicted to grow even more over the next five years. The total addressable market (TAM) of BaaS providers in the European Economic Area and the UK is expected to reach a staggering approximate value of between $90 billion and $105 billion by 2030, and some reports suggest that the market could be poised for mainstream adoption in the next two years.

As BaaS adoption continues to increase amongst brands across multiple sectors, here are some predictions for 2023 and beyond.

1. Brands will look to licensed BaaS providers 

BaaS providers’ access to a banking licence is set to become a key differentiator, as the type of licence directly impacts the scope of products and solutions the provider can offer. Vodeno’s recent research suggests that brands are recognising the importance of having access to full banking licences, with 58% citing that providers offering a licence alongside their tech solutions will shape the BaaS market in the coming years.

2. The rise of banking via brands will help democratise access to better banking

BaaS is changing how people access banking products, making them rely less and less on traditional branch-based banking to meet their day-to-day financial needs. With more companies offering embedded banking products, these brands are democratising better access to quality financial services. According to our survey, 59% of respondents expect that the lines between eCommerce platforms and traditional banking services will blur in 2023 as a direct result of BaaS adoption.

3. Speed of implementation will be pivotal

Rapid implementation and a swift time to market are key priorities according to 35% of the companies surveyed that already offer embedded financial services within their ecosystems. Fully API-based BaaS technology already has cut speed-to-market from years to months, but the providers that can offer a comprehensive solution via a single integration will be most attractive to brands considering BaaS.

4. The cost-of-living crisis will increase BaaS uptake

Just as the pandemic was a catalyst for the acceleration of online retail and eCommerce, the cost-of-living crisis is likely to increase the uptake of embedded finance among businesses – 56% of those surveyed predicted that the cost-of-living crisis would drive increased BaaS adoption. In the current economic climate, brands are under pressure to offer true value to customers, such as flexible credit products and payment solutions, while looking to implement business strategies that are cost-effective. BaaS providers with API-based technology and access to the necessary licence to offer compliance-in-a-box will be sought after by companies who want to quickly launch solutions, but minimise costs.

5. Curating a seamless customer journey 

In today’s digital world, brands must stand out from their competitors by offering a first-class customer journey. The ability to achieve truly embedded finance will require BaaS providers to fully understand specific customer needs and challenges across various sectors, offering the right mix of banking products at the right time. Our survey uncovered that nearly a quarter (24%) of respondents are calling for their BaaS provider to show a greater understanding of their customer journey – a sentiment that strengthens findings from our previous research, which highlighted that businesses implementing embedded financial products are motivated by new revenue streams (41%), growth in customer basket (40%) and enhanced customer loyalty (40%). 

What 2023 holds for BaaS

With more brands looking to adopt embedded finance in 2023, it is the BaaS providers offering a comprehensive set of products alongside a full banking licence and regulatory and compliance expertise that will offer real value to brands and drive BaaS adoption into the mainstream.