Banking-as-a-Service (BaaS) is a game-changing trend that gives brands the ability to embed financial services features within their systems, without having to convert themselves into a regulated financial institution.
New research from Vodeno and Aion Bank found that a boost in consumer demand for embedded banking products has been largely driven by the cost-of-living crisis, with 56% of businesses surveyed awknowledging it.
According to the study, 37% of respondents said they were more likely to choose brands that provide BNPL (buy now, pay later) services and other flexible payment features. When it comes to brand loyalty, 44% cited competitive prices as the most significant factor, while slightly fewer (43%) said that a good selection of products drove their brand loyalty.
BaaS Is Picking Up Steam
With the acceleration of digital trends, especially during the pandemic, BaaS solutions have become increasingly sought after by businesses to boost their customer base. According to Vodeno and Aion Bank, the total addressable market (TAM) of BaaS providers in the UK and the European Economic Area are projected to grow significantly, approaching a value between $90 billion and $105 billion by 2030.
Nearly two-thirds (64%) of decision-makers surveyed said they anticipate that mainstream BaaS adoption will be reached within the next five years. In contrast, other reports claim that mainstream adoption could happen in as little as two years.
The End Goal: A Frictionless Experience
With more consumers seeking frictionless payment experiences, embedded payment solutions offer a way to make secure transactions within a product or service. This, in turn, boosts customer satisfaction and encourages customer loyalty. It is no longer just a good idea, but tablestakes for both businesses and financial institutions.
Kim Van Esbroeck, Country Head and Chief Revenue Officer at Aion Bank Belgium said:
“The benefits of embedded banking cannot be ignored, and our research offers strong evidence that consumers are not only using these products, but it is also positivity influencing their loyalty to BaaS-enabled brands.”