Embedded banking and banking-as-a-service (BaaS) have been mainly concentrated in the FinTech and financial services domain, but that is gradually changing as non-financial services platforms take the plunge into financial services for the first time.
In July, Apple and Goldman Sachs announced the launch of a buy now, pay later (BNPL) service through Apple Pay called Apple Pay Later, an example of how companies are looking to offer direct financial services to their consumers.
For art networking site Talenthouse, it has meant coming up with a banking solution tailored to the needs of the millions in its global creative community, a population that is hugely underserved when it comes to financial services and getting paid for their work.
It’s the reason why the talent crowdsourcing startup recently partnered with Poland-based software company Vodeno — and its Belgium-based European digital bank Aion Bank — to bring embedded banking services to the millions of creatives on Talenthouse’s platform.
“Talenthouse has 14 million members and 3.5 million creatives across its diverse network and what they are actively doing is creating a financial services platform that essentially is going to allow their creatives to speed up payments and access better financial services,” Tom Bentley, chief commercial officer at Vodeno, told PYMNTS in an interview.
The advantage these creative communities have, Bentley added, is that they know their customers inside out. They also have very strong brand loyalty, which makes it a good use case of a community taking the plunge into financial services for the first time.
To do that successfully, he said it is necessary to combine a strong, regulated banking license capability and the right technology that comes with offering banking services.
“You’ve got to have the technology to make sure that customer experience is seamless, [and] that’s where we believe that we [Vodeno] are unique in Europe,” Bentley said.
Outside of the creative world, Bentley said while the last 18 months have been challenging navigating the pandemic, the fully cloud-based BaaS provider has launched a full digital bank and onboarded multiple clients, some of whom have been entirely serviced digitally.
“For us, it has actually allowed us to prove our hypothesis on cloud and the availability to provision the services completely digitally — no paperwork, no filling in forms, [and] identifying customers completely digitally,” he noted.
Leveraging Passporting Rights
In January 2018, the open banking scheme — part of the revised Payment Services Directive (PSD2) — went into effect across the U.K. and Europe, opening up the banking industry to new players while also creating new products and services to improve the customer experience.
Like many challenger banks and FinTechs, Bentley said the scheme has provided great opportunities for Vodeno, including the ability to onboard customers faster, as clients are willing to provide financial data across their bank accounts, and the ability to provision credit to understand customers’ financial health.
“Although it may seem on the surface that these regulations are causing more layers of friction, for a company like ours, which is built on banking as a service, it allows us to move very fast and build some really interesting, unique customer journeys,” he remarked.
The license Vodeno has through Aion Bank has also allowed the fully cloud native ‘360’ platform to easily expand into different geographies and jurisdictions. For example, this year, Vodeno opened branches in Poland and Germany and has plans to launch further in new countries next year.
“We were able to do this through our Belgium license and the ability to passport services,” Bentley noted, adding that the full banking license also gives the firm the ability to issue cards, as well as hold and lend deposits.
Meaningful Collaborations
Bentley added that there’s been a huge wave of new FinTechs and neobanks emerging across Europe, and while some have been highly successful, others have had to shut down operations.
To remain relevant, he said the key thing is to “collaborate in a meaningful way” as Vodeno does, working with 80-plus partners including MasterCard, Tink and Form3, “to bring our solution to life and provision these services.”
For traditional banks, he said the primary challenge they’ll face is how to stay relevant in the face of increasing BaaS and embedded finance services. This will lead them to either invest in their own solutions or partner with technology companies like Vodeno to upgrade their agency services or to offer different solutions.
“You have to be cloud native [and] you need to have open API’s in order to address this space in a meaningful way,” he added.
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