Discover how modern banks are embracing Banking-as-a-Service (BaaS) to unlock innovative revenue opportunities and redefine customer engagement.
A New Era for Banking Innovation
In this episode of The Fintech Finance Show by FF News, we explore how BaaS is empowering banks to go beyond traditional services, offering dynamic financial products that drive customer satisfaction and business growth. From leveraging advanced technologies to collaborating with fintech leaders, our expert panel delves into the transformative potential of BaaS models.
Meet the Experts
Our panel of industry pioneers share their direct experience on how BaaS is shaping the future of financial services:
- Rivo Uibo, Co-founder and Chief Business Officer, Tuum
- Daniel Rowlands, VP Business Development, LHV Bank
- Gabriel Viera, Chief Compliance Officer, Zenus Bank
Together, they bring decades of experience in financial technology and banking innovation, offering actionable insights and forward-thinking strategies.
Key themes in this episode:
- Evolving from traditional banking models to flexible, scalable platforms, embedding financial services for a wide range of business types including non-financial institutions
- Capitalizing on open banking to tackle complex financial challenges and open new business revenue streams.
- The open banking technology crucial for BaaS scalability and reliability — operational 365 days a year, 24/7.
This episode is a must-watch for banking professionals, fintech innovators, and anyone interested in the evolution of modern banking and how innovative approaches like BaaS are creating new revenue pathways, ensuring banks stay relevant in a rapidly changing world.
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How BaaS Can Open New Revenue Streams for Banks – LHV Bank, Zenus Bank, and Tuum
[Full Transcript]
[00:00:12] Rivo Uibo: I, I think there are like a, a few key trends that we could speak about. The first thing is that the banking as a service market itself, it’s maturing. If you look at the first wave of those past banks and companies that came to the market they mainly targeted the fintech segment and also, it was like incredibly simplistic.
Now, if it’s, let’s say that look at the newcomers and the ones who have survived, there is a lot of emphasis on the compliance side of the things and also actually trying to really lookfor the problems and to find those problems that are worth solving, which means that there has to be a serious economic impact as well. So that’s item number one.
Secondly, if you look the banks’ perspective, or the bank’s aspect, then like they’re looking for the ways how to remain relevant. The level of competition out there, for the market share, it’s crazy. So you have to find ways to remain relevant. And then at the same time, also, how can you find new revenue streams? And also, you have to be able to ask, let’s say, answer the question, but can I somehow capitalize on what I have built already?
The first and the biggest benefit is that you have to be able to answer that – where do you spend most of your effort? You either build the baseline capable core banking infrastructure, or you are like actually solving the issues and you are spending your efforts on the product management, value added integrations and so forth. I think this is something that LHV and Zenus, like with the help of Tuum, have been able to tackle really well.
They do understand like intimately where the needs of their specific target market is and what are the kind of like value added integrations and unique propositions they need to build an offer to the market. So that really helps to create another generation of winners, winners and businesses at scale.
[00:02:14] Daniel Rowlands: When it comes to scaling, it’s all about the onboarding. You can do it in a very fast, efficient way. You don’t need to bog yourself down with a new way for collecting K-Y-C-K-Y-B information. You can roll out your planning in multiple countries at the same time.
All of the stuff that the BaaS provider does is kept sort of away from bogging that down so they can concentrate on scaling the business quite quickly, whereas you take care of all of the stuff, which is quite complex from an administrative and regulatory perspective.
I think for LHV specifically, we recognize that we are working with a large amount of diverse fintechs from verticals like PSPs, FX, remittance, lending. And so, in a way we are systemic to payments and to fintech growth.
And so we have a duty to not have closed walls, but actually in a way to open source everything. We need our clients to know exactly the services they can consume from us and exactly how to consume them as well, which is why we work really closely with them.
Our APIs are all publicly available. And so, we have a duty to be collaborative and only I, in my personal opinion, if we work in this fashion, then we can really progress the industry.
[00:03:51] Gabriel Viera: Zenus through its partnerships, we’ve enabled fintechs and large corporations to embed financial services, specifically our USD account, in our existing offering, we enhanced customer engagement and retention. We’ve helped fintechs and other corporations with this new USD account embedded to grow.
Super apps and LATAM have been able to offer integrated US bank banking services directly to their users, resulted in more and more, seamless experiences, easier just to open an account through their platform in US currency. The partnership, we create mutual value.
Our partners provide added functionality to their customers, and we extend the reach. Additionally, our customizable APIs allows us for unique branding and users interface options, making the experience truly personalized for the end user.
[00:04:53] Rivo Uibo: The next generation banking systems like Tuum, and now here I I describe also the way how we have built Tuum, like by having the open architecture and API first offering, that basically helps all those counterparties, to build those seamless flows because the systems need to interact with each other and having all the key business services published, that’s the absolute must.
The second key thing is all those wonderful capabilities that nowadays cloud environments provided, being cloud native and being able to benefit from those like dynamic scaling features.
Because when you offer a banking as a service type of value proposition at scale, your institution will basically process such kind of a volume that the institution has never seen before.
Then also, the bank has to be operational, with its value proposition 24/7, 365. So you really can’t take down your system, but luckily with nowadays modern technology, with the microservices asynchronous processing and so on.
[00:06:03] Gabriel Viera: From a strategic standpoint, becoming a provider of embedded banks accounts has allowed Zenus to evolve from a traditional bank, digital bank, to a flexible platform supporting a wide range of businesses. This just differentiates us as we provide customized banking solutions to different partners tailored to their customer base.
We’ve seen advantages in terms of market reach and customer acquisition using our embedded account as a channel to bring us banking to new demographics, US bank accounts to new demographic.
Our B2B relationships gives us a unique edge in delivering value across different industries.
[00:06:55] Daniel Rowlands: LHV has been embracing open banking technology for a number of years now. Our Estonian bank is very mature in the market, and if you go to Estonia, whether you are in a client, in a shop, you’ll see an LHV POS terminal, and if you’re on an e-commerce site, you’ll see a pay by bank option by LHV.
And so we’re doing the same thing here in the UK. So we’re about to launch a retail bank. Naturally, you’ll be able to fund your account with open banking technologies, so paying from other accounts that you have.
And on the BaaS side of things, we’re also about to launch payment initiation services to our fintech clients, which means they’ll be able to offer that technology white label to their end customers as well.
So we’re all in on open banking, you could say.
The flip of that is, of course, open banking as a whole. I think it’s been quite a difficult industry to progress in, certainly to commercialize in.
And, I think open banking providers particularly have this kind of model whereby potentially you’re having a race to the bottom on fees, your margins are suppressed and your unit economics aren’t quite working. So, it’s quite difficult to commercialize.
My personal opinion is you need to go much deeper into the value chain to solve the complex pro problems. So, if you’re offering things like payment orchestration, payment initiation services, improvements in fraud and so on, that’s where you are solving complex problems. And the value is really, really high and people want to use it and prepare to pay for it. So, if those things are solved, if those elements work out right, then I think that it’ll really pick up traction as a whole.
[00:08:40] Rivo Uibo: Tuum has an unfair advantage. The founding team has been building banking infrastructure for so long and we have done it like in a way that no one else has had the need to do it. Meaning that we have started early two thousands from like real time transactional core banking systems to like, 2014-15, we built some of the maximum scalability systems running in AWS. In 2016-17 we built some of the fully microservices-based, core banking suits, and when we started to build Tuum, barely five years ago, then we pushed the boundaries again.
And no other market participant has ever had the need to push the boundaries so many times. And also, have all those enterprise credentials that the banks and banking as a service value proposition vendors need. So that is quite a unique value proposition out there.
So learning it over the course of long period of time and then knowing with the military precision what and how needs to be built.
[00:09:58] Daniel Rowlands: I think the biggest value we can provide to our fintechs when we, when we’re processing lots and lots of payments is really the data.
I think. When you look at payments as a whole across the UK and Europe, you’ve got lots of different payment schemes. You’ve got lots of banks that have different ratios of payments acceptance rates. You’ve got, data that you need to collect. Ultimately, what we’re trying to do is to help our fintech clients and the end consumers send payments in real time.
Where things go wrong is where payments get stuck. So what we can do is we can advise our clients, which schemes to use, which potentially banks to avoid how to minimize IBAN discrimination. And really that’s where the value add is because people get really angry and really frustrated where their money doesn’t arrive on time.
And I think the SLAs around those factors are really high for a reason. And so, if we focus on getting that right, I think we’ve got a really, really good way to scale that out.