Half of European businesses believe banking as a service (BaaS) will make traditional banking obsolete, according to new data.
A survey of more than 1,000 European businesses – including companies from the UK, Belgium, and the Netherlands – found that 51% of European firms expect BaaS to replace traditional banking services.
BaaS is a form of technology, usually through APIs, that allows companies that are not licensed banks to provide certain banking services to consumers through a third-party fintech.
According to the survey, which was commissioned by Vodeno and Aion Bank, 39% of respondents said that they have already implemented BaaS products into their businesses and an additional 38% said they were considering using BaaS in the new year.
Alongside the belief that BaaS will one day make traditional banking obsolete, 65% of businesses said they expect to see more consumers using banking services via non-financial brands (through BaaS) over traditional banking, leading to a decline in the market of the latter.
“Platform banking – where financial products are embedded in the customer journeys of brands people use every day – is the future,” said Wojciech Sobieraj, CEO of Vodeno.
“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.”
The rise in popularity of BaaS does not necessarily mean bad news for traditional banks, however, as some key players in banking have already started branching out to provide BaaS alongside their standard services.
HSBC in October of last year announced it would work with cloud Enterprise Resource Planning (ERP) company Oracle NetSuite to launch a BaaS offering.
The survey was part of the Banking as a Service 2.0 – Why Embedded Finance will make its mark in 2023 report from Vodeno and Aion.