51% of European Businesses Believe Banking-as-a-Service Will Make Traditional Banking Obsolete

Over half of European business leaders expect Banking-as-a-Service (BaaS) to make traditional banking obsolete, according to new research from Vodeno/Aion.

The BaaS provider commissioned an independent study among more than 1,000 senior decision-makers within businesses based in the UK, Belgium and Netherlands*. Its report – Banking-as-a-Service 2.0 – Why Embedded Finance will make its mark in 2023 – reveals that 51% believe BaaS will spell the end of traditional banking.

Vodeno/Aion’s survey found that having the necessary licence and compliance expertise is set to play a more prominent role in BaaS adoption. Almost three in five (58%) respondents believe BaaS providers that offer to use its  licence alongside a tech solution are the ones that will shape the BaaS market in the years to come.

At present, 39% of respondents have already implemented BaaS services and products, with an additional 38% considering using BaaS in the new year. When surveyed about which BaaS products were planned for implementation, foreign exchange (48%), buy now, pay later (48%), SME lending (47%), and loyalty schemes (46%) were among the most popular.

Of the respondents who have not implemented BaaS solutions to date, 32% said they do not know enough about BaaS, 29% said there is a lack of understanding about the products available, and 27% cited compliance and security concerns as a key barrier to adoption.

Vodeno/Aion’s research  underscored the importance of seamlessly embedding financial services into the customer experience, with 24% stating that they would like to see their BaaS provider showing a better understanding of their customer journey. Innovating the checkout experience is the key desired outcome for many BaaS adopters. Previous Vodeno/Aion research highlighted businesses that implemented embedded financial products were motivated by new revenue streams (41%), growth in customer basket (40%) and enhanced customer loyalty (40%).

Business leaders offered several predictions for the growth of the BaaS market. Most (59%) expect the lines between eCommerce platforms and traditional banking services to blur this year as a result of increased BaaS adoption. Even more (65%) expect to see more consumers using banking services via non-financial brands enabled by BaaS, rather than traditional banking. A further 60% predict a decline in traditional branch-based banking.

Looking to the future, almost two-thirds (65%) of those surveyed about industry trends predict that more Big Tech firms will move to deliver financial services, and over half (56%) believe the cost-of-living crisis will act as a catalyst for increased adoption

Wojciech Sobieraj, CEO of Vodeno, said: “Platform banking – where financial products are embedded in the customer journeys of brands people use everyday – is the future. We know that companies looking to implement BaaS also want care-free products and services, with the technology, necessary licence and regulatory checks offered in one combined solution. At Vodeno, we are leading the European BaaS sector on the front, with a comprehensive range of BaaS products alongside access to a full ECB licence and the compliance expertise that comes with a European bank.”

* The respondents were surveyed across 10+ industry sectors, including Architecture, Engineering and Building, Arts & Culture, Education, Financial Services, Healthcare, HR, IT & Telecoms, Legal, Manufacturing & Utilities, Retail, Catering & Leisure, Sales, Media & Marketing, Travel  & Transport.