You’re probably familiar with the term software-as-a-service. Instead of paying for entire applications or building them in-house, software-as-a-service allows you to use an application on a pay-as-you-go model. Think of Dropbox, for example. Instead of purchasing a piece of hardware to store your data on, Dropbox lets you do so in the cloud. You just pay for the space you use.
It’s a revolutionary model that has swept the services industry. And that’s where banking is heading.
Banking-as-a-service applies a plug-and-play, on-demand model to financial services. And what that means is we’re going to see many more non-financial websites offering financial services that are relevant to their audiences.
Some companies are ahead of the curve. And while you may not have heard the term banking-as-a-service until now, you’ll almost certainly be familiar with some of its biggest success stories.
Here are the top examples of banking-as-a-service.
Grab has launched a “buy now, pay later” service. Essentially, the journey sharing platform has integrated a consumer loan product directly into its app. This provides not just a new revenue stream, but more journeys and higher levels of customer loyalty.
Shopify, which provides infrastructure to e-commerce shops, has launched several financial services products. And if they don’t make the company a fintech, they certainly help blur the lines between retailers and the financial services industry.
Most notable, US merchants on Shopify can offer instalment payments to their customers for purchases between $50 and $1,000, with zero interest. And added to that, the merchant receives the amount in full immediately.
The e-commerce company has recognised that cash flow is an important consideration for its customers and that, in turn, the ability to borrow interest free for its customers’ end users will encourage new sales. By utilising embedded lending, Shopify has driven its retention rates higher while strategically boosting its fulfilment network.
By creating upfront value for its customers with the launch of Apple Card, the computer giant has been able to further its mobile payment strategy.
At first, the card issuing tactic seems like any other rewards based credit card. But when you take a step back, you see the potential of this embedded financial tool.
Apple Card, launched with Goldman Sachs, is at the heart of Apple Pay. Card holders benefit from discounts on, and other incentives to purchase, Apple products. Purchases made using Apple Pay get two percent cashback. Meanwhile, card holders also receive exclusive promotional content and a magazine subscription, all of which are endorsing its own products and services, from gaming to computer hardware.
Apple has looped banking-as-a-service into its content strategy to further its sales objectives and other core products.
Grow your business with embedded finance
The financial capabilities of banking-as-a-service go far beyond those associated with traditional financial services products. They can create new revenue streams, lower cart abandonment rates and improve customer retention levels. More than that, banking-as-a-service can play a pivotal role in furthering the broader business objectives of an organisation.
If you’re wondering what embedded finance could do for your company, schedule a time for an informal conversation with our team.
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