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October 2023 - Financial Services

64% of business decision makers predict that BaaS will be mainstream within next five years: A survey of senior decision-makers at businesses across the UK, Belgium and the Netherlands has found that almost two-thirds believe that Banking-as-a-Service (BaaS) will be adopted by the mainstream within the next half decade.

The research by Vodeno surveyed over 1,000 respondents, with the intention of trying to understand more about BaaS at a time when it is becoming increasingly popular with non-financial brands seeking to use BaaS to embed financial products directly into their customer journey.

The research found that more than half the respondents polled said they believe the cost of living crisis will be a key driver for BaaS adoption, while more than three-quarters said that they have either implemented BaaS (39%) or plan to do so this year (38%). It found the most popular products that companies are planning to introduce are foreign exchange (48%), Buy Now Pay Later BNPL (48%), SME lending (47%), merchant financing (47%), loyalty (46%) and instalment loans (46%).

The research also found that the majority of business leaders are feeling positive about BaaS, with two-thirds saying it is 'transforming financial services for the better' and 58% saying they believe their competitors will be using embedded banking services in 2023.

The survey also revealed some insight into how decision makers believe the future might look following mass BaaS adoption, with more than half saying that it could eventually render traditional banking 'obsolete'. Six in 10 said they believe there will be a decline in the number of physical bank branches in operation, while 65% said they envisage seeing an increase in consumers using banking services via non-financial brands, enabled by BaaS rather than conventional banks.

Of the businesses who have already adopted BaaS or intend to this year, 41% said they expect to see increased revenue as the main benefit, while the ability to launch new products and business models were also viewed as a top advantage. Boosting customer engagement (33%), bolstering conversion (33%) and repeat visits and biggest customer shopping baskets 29% were also cited as the most beneficial elements to implementation.

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