Finastra’s Banking as a Service: Outlook 2022 | Paving the way for Embedded Finance reveals that APAC’s appetite for BaaS services exceeds that of EMEA and the Americas. The study noted that 88% of senior executives across Asia-Pacific, including banking, healthcare, retail, and technology, said they are already implementing BaaS solutions or are planning to, compared with 80% in EMEA and 87% in the Americas.
Other findings
- Over 46% of APAC distributors – the consumer brands that supply embedded financial products to consumers at the point of need – currently offer, or plan to offer, credit cards to their customers using Banking as a Service, with other popular offerings including savings accounts (41%) and payment cards (38%)
- Distributors are spending US$10-$50m per year on financial products and service partnerships across APAC - a high level of spending that is expected to be sustained throughout 2022
- Globally, more than 80% of regulated financial services providers expect the overall BaaS market to grow. Of these, 30% expect it to grow by more than 50% per year over the next five years
- BaaS represents a $7 trillion opportunity - distributors, including retailers, e-commerce firms and other consumer brands, are migrating towards BaaS solutions and expect overall growth to exceed 70% per year over the next three years globally; 60-70% of distributors want to increase their spending on financial partnerships (including BaaS)
Angus Ross, chief revenue officer, Banking as a Service at Finastra says BaaS is an incredibly exciting opportunity for the entire financial services ecosystem. Financial institutions can reach a greater number of customers at significantly lower costs, while distributor brands can open new lines of revenue and build deeper relationships with their customers.
“It’s clear from our research that consumers (retail or corporate) are changing where they source financial services and shifting to non-bank channels. This trend will only accelerate as integrating regulated products into the customer journey becomes as simple as creating a social media account,” he continued.
BaaS use cases
Theodora Lau, founder, Unconventional Ventures says there is a growing embedded finance ecosystem, especially as it relates to extending services to communities and businesses that have been traditionally underserved with limited offerings.
“Small businesses and entrepreneurs form the backbone of our economies. With thoughtful innovation, we have the opportunity to create a more level playing field and a more equitable future for all. Technology innovation ultimately needs to be about people,” she continued.
Kelvin Tan, global lead, Standard Chartered nexus, calls out two businesses in Indonesia – Bukalapak, a listed technology unicorn, and Sociolla, a beauty e-commerce platform – that embedded financial services in their ecosystems.
Standard Chartered nexus provide these brands with its expertise, banking licenses and a modern tech stack to offer partners’ customers personalized financial products – enabling lucrative new revenue streams and a ‘stickier’ ecosystem experience.
Finastra’s research also assessed the monetization strategies of distributors, enablers and providers in BaaS, and explored the importance of partnerships. All respondents were in favour of a transition to a platform and marketplace model, where a greater range of niche solutions at competitive prices can be sourced by end customers.
