Retailers, big and small, are constantly looking for ways to stay relevant in the digital age. With traditional methods of shopping evolving rapidly, retailers must adapt to keep up with consumer’s needs for engagement, automation, and omnichannel experiences. This is where Banking-as-a-Service (BaaS) comes in, offering a new opportunity for retailers to partner with banks to offer trusted, credible, and regulated financial products to their customers and expand their engagement. However, despite these advantages, many retailers are still missing out on the value that BaaS presents.

What does offering banking services have to do with retail?

BaaS is the white-labelling of financial products from a bank to a company’s end user. For example, retailers can use BaaS to provide customers with alternative payment methods and funding options, such as digital wallets, instalment payment plans, and other financing options at check out. This means that retailers can partner with banks to offer banking services such as loans, credit cards, and savings accounts.

This ultimately enables retailers to focus on their core business while allowing the banks to cover the financial components of the customer experience with their banking license. This approach enables businesses to increase efficiency and enhance customer satisfaction. By implementing BaaS, retailers can provide reliable financial products to customers, fostering trust in the retailer, whilst leaving the operational, regulatory and compliance responsibilities to their partner financial institution. On top of that, the wide range of financial services and payment options opens a door by providing an end-to-end solution for customer satisfaction and loyalty. 

How can BaaS help online retailers?

A great use case of BaaS coming to life is an online marketplace selling various products from wholesalers or boutiques that want to leverage their online traffic. By positioning themselves as more than just a marketplace, retailers are able to incentivise purchases on their platform and ensure consumers are rewarded for using their website rather than going direct to the supplier. This technique offers online marketplaces with a significant competitive advantage, enhancing customer satisfaction, driving sales, and ultimately fostering customer loyalty. This is especially valuable for online marketplaces without their own products, which may need to work harder to establish customer relationships and trust.

10x Banking head of sales for APAC, Richard Lim.

Embedded finance also reduces friction in a customer’s purchasing journey and offers a more holistic buying experience, particularly with larger value items.  Aside from a more seamless payment process, lending solutions such as BNPL or instalment loans can be offered to customers which could uplift overall turnover in sales and offer consumers personalised cashflow management.

As retailers expose their captive customer base to financial institutions through a BaaS partnership, commercial incentives could also be on the table (e.g. margin share on loan products) creating a mutually beneficial partnership between participating organisations. 

Will this erase the bricks-and-mortar shop front?

The introduction of BaaS is no killer of in-person shopping, in fact, the technology becomes a complimentary way to engage customers to continue returning for the financial benefits. The customer data and behaviour insights provided by BaaS enable retailers to create a more personalised experience to provide tailored recommendations and promotions, which can help improve customer satisfaction and loyalty.

For bricks-and-mortar retailers with a high number of customers who are small businesses or a part of the trades industry, offering credit options through BaaS to streamline invoicing, facilitate business credit cards and manage cash flow can help give these retailers a distinctive edge. Think of it like an added component to a rewards card or benefits programme. On top of that, BaaS providers can offer marketing tools that help these retailers attract new customers and retain existing ones. Even online retailers with brand recognition and an expanding offering can benefit from BaaS by offering financial products such as savings accounts and credit options to retain their attraction as newcomers join the market.

By providing a new way for retailers to engage with their customers, BaaS has the potential to revolutionise the future of shopping. Retailers cannot afford to sleep on Banking-as-a-Service.The benefits are clear, and retailers who do not explore this opportunity risk falling behind in the digital age. By partnering with a BaaS provider, retailers can focus on their core competencies while leaving non-core functions to experts. As a result, businesses can streamline their financial operations, improve efficiency, and enhance customer satisfaction. It’s time for retailers to explore the benefits of BaaS and embrace the opportunities it presents for their business growth.

Richard Lim is head of sales for APAC at 10x Banking.