Thinking About “Banking as a Service”? These are three excellent tips

The way we obtain financial solutions is changing dramatically in the modern era. Banking-as-a-Service (BaaS) is the foundation for the growing trend of everyday brands providing banking products directly to their customers. As a result, companies using BaaS are benefiting from higher sales and more dedicated customers.

Embedded finance powered by BaaS enables companies in a variety of industries to enhance customer experiences by providing financial products in a way that is contextual and easily integrated into the user journey.

Adoption of BaaS is not as simple as the term “as-a-service” implies, even though it has the potential to resolve many customer journey friction points. More thought and planning goes into BaaS implementation than into technology integration. The best BaaS projects require a laser-like focus on the requirements and obstacles of their clients, determining the ideal product-market fit, and making sure all legal and regulatory requirements are met.

Thus, here are three essential tips for any company thinking about entering the BaaS market.

Consider the needs of the customer

A thorough grasp of the company and its clients is the foundation of any successful BaaS project. The problems that clients encounter and the financial options available to address them will determine the best BaaS solution.

For this reason alone, BNPL is a well-liked solution among brands and retailers. Customers can choose to pay for the things they want now and over time by deferring and splitting payments. In addition to improving conversion for the vendor, BNPL allows customers to select more ambitious products.

According to recent studies, customers will only make high-priced purchases, travel, or home appliances from companies that offer BNPL at the register.

Compliance and regulation are essential

Since BaaS solutions are financial products subject to regulation, compliance and regulation are essential to their successful implementation. This cannot be emphasized enough.

All BaaS providers are not made equal, though, especially when it comes to licensing and compliance. Certain providers limit the financial products they can offer to payments by offering Electronic Money Institutions (EMI) licences. With full banking licenses at their disposal, other providers can provide a full suite of services, including deposit holding, savings account opening, and lending solutions facilitation.

In addition to the required banking license, BaaS adopters will want to take the BaaS provider’s regulatory experience and compliance knowledge into account. To stay fully compliant at all times—especially as projects grow—selecting a BaaS provider who can manage compliance and anti-fraud requirements is crucial to avoiding pitfalls.

Think about scalability

BaaS requires scalability, so launching a project without first thinking about how it will grow and change over time is a risky strategy.

Once more, in order to be successful, scalability needs to be carefully considered, based on the appropriate technology and licensing, and have a solid Go-To-Market strategy. It’s a wise move for many companies to take a tentative step into the field by providing embedded payment solutions. However, the correct BaaS provider can then assist companies in determining which extra products would be valuable and where to apply them in the customer journey.

It is highly likely that the BaaS market will keep expanding rapidly in the coming years, driven by adoption in a wide range of industries and use cases. Adopters must, however, prepare carefully because they cannot run before they can walk.

The best people to assist businesses in navigating and scaling their BaaS journey are unquestionably those who can offer a full end-to-end service, including technology, banking licences, and regulatory and compliance expertise.

The aforementioned tips should serve as a helpful checklist of important factors to take into account.