Blog Post by Emils Kragis, Business Development Officer at PayPugs
Just a few years ago, people had to go to a bank, talk to a person and wait days, or even weeks, for a hopefully positive response. Today, most of the business is shifting towards the digital environment and customers are able to access their favorite stores in a matter of clicks.
Thanks to Banking-as-a-Service (BaaS), businesses can integrate features like payment processing, card issuing and financing directly into the customer journey for better engagement, retention and satisfaction. As financial services become more fine-tuned to reflect the needs of consumers, the BaaS business model could be your business opportunity to grow and prosper ahead of competition.
What is Banking-as-a-Service?
Banking as a Service (BaaS) describes a model in which licensed institutions integrate their digital banking services directly into the products of other non-bank businesses.
The best way to understand this model is by using an example. Imagine that you are the CEO of a cruise ship company amid growing competition. You understand that every customer is important, and you wish to improve the customer experience and ultimately gain the customers’ loyalty. The fierce competition has left you searching for different, unique solutions. One solution could be offering debit or credit cards for customers to spend money and earn points that can be redeemed for some extra features on the cruise. Each time a customer uses the debit card, they interact with your brand.
There are dozens of opportunities when it comes to offering something unique to your customers. Ultimately you reach the goal of outcompeting your competition, but also you increase the customer relationship as you are offering more personal services.
Benefits of BaaS
You don’t need a license.
Understandably, to offer banking services to your customers requires a banking license. Obtaining a license from your local government can be a lengthy and costly process. Moreover, once you get the license you are required to be compliant with many regulations to prevent money laundering and tax evasion.
This is where BaaS steps in. With BaaS you can offer the desired banking services to your customers without the need for a banking license because the services are provided by the licensed institution. The integration allows the end-users to access the customers’ website for banking services while the customer only acts as an intermediary.
Of course, without requiring a banking license, you do not have to be burdened by any of the regulatory requirements such as AML (Anti-Money-Laundering) and KYC (Know-Your-Customer). Simply focus on providing the best customer service on your interface, while the compliance duties are handled by the banking institution.
The BaaS model is only the starting point for obtaining digital banking services. Depending on the BaaS partner, you can expand your service offering as new services and technology are introduced. For example, the newest trend is access to cryptocurrency payments. Now, when many licensed institutions have obtained such service, it is easily available for you to offer to your customers as you are already integrated with the partners API system. The easy access allows you to stay ahead of the competition and improve the customer experience.
Depending on the banking services that you offer with the help of BaaS you can increase your revenues quite significantly. For example, imagine you as the CEO of the cruise ship company offering buy now, pay later. This allows customers to purchase the ticket and pay for it at a future date. Such a service can increase the number of people booking your cruise trip and increase your revenues in the short term.
Why is it the right option for Your Business?
BaaS solutions can be a great possibility for your company to grow without scaling complexity. With the opportunity to do business globally thanks to the digital environment, customer acquisition and retention is more important than ever. The BaaS model not only gives you the possibility to offer a wider range of services but also helps to increase your customer engagement, brand recognition, and loyalty.
When considering a switch to the BaaS model, make sure to research the issues of customers and come up with a development plan — a thought-out solution can make all the difference in successful implementation.
With a focus on the growing market demand, PayPugs has developed a ready-made BaaS solution that allows for providing e-wallet services through an API connection. It is a solution that is widely used by industries such as forex brokers and payment service providers to serve their customers by providing international payments, IBAN accounts, and cards.
By integrating PayPugs’ ready-made solution, the customer’s backend operations like AML and KYC are secured and provided by PayPugs. This means that the customer can focus on frontend processes like branding and customer service.