Solarisbank, the pan-European leader in Banking As A Service, shared its vision for the industry and defined the main developmental directions in which the main economic sectors could evolve under the impetus of the “Banking Revolution” brought on by integrated finance. European companies have a tremendous opportunity to improve their position by adopting embedded financial services.
The potential of embedded finance is huge and therefore the market for Banking-as-a- Service is immense. In Europe alone, it is estimated that nearly 500 million bank accounts will be opened. The business model of which Solarisbank is a promoter allows any company to incorporate, via API, financial instruments into their product portfolio, in a personalised way, while maintaining full control over the look and feel and relationship with its customers.
The integration of financial services into non-banks, or to put it simply, embedded finance, is reshaping the way consumers interact and will interact with financial services. This is a great opportunity from several perspectives: companies that offer financial services directly to their customers can both strengthen their loyalty and tap into new revenue streams.
In a recent study conducted by Solarisbank with the Handelsblatt research institute, a sample of over two thousand respondents were involved to analyse the willingness of consumers – in this case Germans – to use financial services from a selection of leading online shops. It emerged that as many as 61.4% would be willing to use a financial service from at least one of the proposed online shops – an absolutely remarkable percentage.
A wake-up call for Italy and Europe, the time is now!
Given that the development of embedded finance in Europe is still in its embryonic stage, we can consider an example from other parts of the world, such as the United States and Asia, where, in the face of the implementation of regulations similar to PSD2, large technology companies have already entered the vast potential of integrated finance. In fact, the industry will experience a season of great growth worldwide, particularly in the old continent, thanks to the introduction of integrated finance: Lightyear Capital estimates that integrated finance will grow tenfold over the next four years, reaching $230 billion by 2025.
Bain Capital Ventures assumes that by 2030, the volume of this segment – in the US market alone, which is more mature than the European market – could reach around $3.6 trillion. All these forecasts and the indicators supporting them confirm an immense opportunity for the European market.
Who in the world has already seized the opportunities of Banking as a Service?
Here are some significant examples that give an idea of the benefits that companies and users will gain from Banking as a Service
GDO – Walmart: retail meets integrated finance
Their goal is to “develop and deliver modern, innovative and cost-effective financial solutions” and provide “technology-driven financial experiences tailored to Walmart’s customers and partners”. Or in other words, the goal is to better serve their 230 million customers with the power of integrated finance. How? By creating an ecosystem of financial services created around the needs of their customers. This includes a Walmart credit card, debit card, money transfer services and the ability to pay for purchases in installments. For Walmart, a retail shop that is founded on offering great value and customer service, integrating financial services into their portfolio of offerings is a natural step into deepening customer relationships and supporting the core business.
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APP services – Grab: the transport app that has become an everyday super app
Grab is Southeast Asia’s largest ride-hailing and food delivery company. The company started as a basic taxi booking app and later evolved into a super app with an impressive ecosystem of services. Grab began incorporating financial services into their offerings in 2019, launching a digital insurance marketplace in a joint venture with ZhongAn Insurance. Since then, the company has continued to add more financial services by securing a number of partnerships with fintech companies. Their financial offerings now include GrabPay, a payment solution that includes a card and a mobile wallet, AutoInvest, a micro-investment solution released under the GrabInvest umbrella, as well as consumer loans and buy now pay later (BNPL) payment options. With integrated finance, Grab can tap into a growing market, tapping into more than 200 million registered users in eight countries, opening up new revenue streams and driving financial inclusion in Southeast Asia.
Ride Sharing and the NCC world – Lyft: more security and instant payments with a debit card
for drivers
Lyft, the second largest ride-sharing company in the US, uses built-in finance to build loyalty among drivers by allowing them to manage their finances directly in the Lyft app. With Lyft Direct, Lyft provides a debit card and bank account – in partnership with Payfare and Stride Bank – that allows their drivers to receive compensation instantly after each ride, eliminating any transaction fees and increasing financial security by solving cash shortages.
Instant Messaging – WhatsApp: adding payment functionality to its largest marketplace
WhatsApp is the most popular messaging service, with around 2.5 billion users worldwide. The Facebook-owned company recently incorporated payments directly into its instant messaging app in its largest market, namely India. The payment feature is powered by BHIM UPI and processed by various local payment partners. The value proposition is quite simple – it allows users to send money to friends and family at no extra cost. However, what makes it much more convenient than other P2P payment services is that it is directly embedded in the same application that users already use to communicate with their friends and family.
This content is provided by our Corporate Member Solarisbank