Banking-as-a-Service (BaaS) provider Vodeno has revealed that half (51 per cent) of business leaders believe BaaS will eventually make traditional banking obsolete in its latest report.
Vodeno surveyed over 1,000 business leaders across the UK, Belgium and the Netherlands, gauging predictions for the BaaS market in 2023. The “Banking-as-a-Service 2.0 – Why Embedded Finance will make its mark in 2023” report also looks into how business owners and leaders currently view BaaS.
Overall, 51 per cent of respondents believe BaaS will bring about an end to traditional banking. Meanwhile, 58 per cent believe BaaS providers that offer to use their licence alongside a tech solution are the ones that are to grow to lead and shape the market.
In an effort to understand how much progress BaaS services have already made, Vodeno looked to understand how many businesses have already implemented it. Thirty-nine per cent of all respondents had already implemented BaaS services and products. Thirty-eight per cent are also considering starting to use BaaS services in 2023. The results show how a significant majority view BaaS as something that can benefit their business.
Of those that considered implementing BaaS, the following products were cited as the most likely to be introduced:
- 48 per cent – Foreign exchange
- 48 per cent – Buy now, pay later
- 47 per cent – SME lending
- 46 per cent – Loyalty schemes
Of the respondents who have not yet implemented BaaS, 32 per cent felt they did not know enough about it. Twenty-seven per cent explained that compliance and security concerns stopped them from adopting BaaS. Twenty-four per cent of respondents displayed an interest in the integration of embedded financial services into their customer experience.
Previous Vodeno research also highlighted that businesses that implemented BaaS products were mostly motivated by:
- 41 per cent – New revenue streams
- 40 per cent – Growth in customer basket
- 40 per cent – Enhanced customer loyalty
Future growth of the BaaS market
Fifty-nine per cent of respondents expect “the lines to blur” between eCommerce platforms and traditional banking services in 2023. Sixty-five per cent expect to see more consumers using banking services via non-financial brands enabled by BaaS.
It appears that there is a general consensus that BaaS is a factor contributing towards a downward turn for traditional banking services. As part of the Vodeno survey, 60 per cent predicted a decline in traditional branch-based banking.
Finally, respondents considered the future of industry trends. Sixty-five per cent believe big tech firms are to transition to deliver financial services. At the same time, 56 per cent believe that the cost-of-living crisis will ultimately increase the adoption of BaaS products and services.
Nikhil Sengupta, global sales director of Vodeno, also explained her expectations for the future of banking. Sengupta said: “We believe that the way people access banking products is set to evolve from traditional branch-based banking to ‘platform banking’, where financial services are offered by the brands consumers use every day.
“At the heart of this shift are Banking-as-a-Service providers who are helping democratise better banking products to more people with the promise of embedded finance across multiple sectors.”