How Aion Bank Unleashes the Opportunities of Open Banking with BaaS

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We kickstarted a new series of Afterwork sessions on August 25. To ensure we did it with a bang, we invited Kim Van Esbroeck, Country Head Belgium of Aion Bank and Region Head Benelux, France and Nordics of its Banking-as-a-Service (BaaS) offering. We asked her for an update on Aion Bank's business and, more specifically, their Banking-as-a-Service (BaaS) offering.

Most of you know that Aion Bank launched its business in early 2020, with the license of Banca Monte Passchi di Belgio and the technology of Vodeno. Both Vodeno and Aion Bank are ventures of Warburg Pincus, an global private equity company.

Two years ago, in the summer of 2020, we invited Kim to The Banking Scene Afterwork for the first time, focusing on its membership-based consumer offering. A year later, they launched an SME offering. Today, the focus is more on their BaaS product development, of course, while growing its direct banking services to consumers and SMEs in their home markets, Belgium and Poland.


What is Banking-as-a-Service?

Many Fintech companies and banks offer what they call "Banking-as-a-Service". I am going to be honest: today, we have so many "BaaS providers" that it makes me reluctant to talk about the topic, as everything is BaaS these days. That is, in fact, one of the main reasons I was happy having invited Kim. She came up with a clear definition and many use cases to explain what that definition means.

Her definition is concrete, complete and exceptionally wide in terms of scope. According to Kim, BaaS providers need:

  • A banking license, like Aion Bank has, supervised by the National Bank of Belgium and passported throughout Europe
  • A fully open, API-based technology stack, allowing third parties, whether regulated or not, to connect in a very "lean and mean" way, like Aion Bank has through its technology provider Vodeno
  • To cover all the main components of a bank's business, from cards to payments, and accounts, but also lending and investment products
  • To provide these services for both consumers and business customers

Aion Bank provides the license and banking activities. Vodeno takes care of the technology. Together they build creative solutions for their clients.

Kim: "Having said the combination of those four things, we see only one competitor on the European landscape with a similar offer to ours, German-based Solarisbank. Of course, many niche players compete with some elements. However, Solarisbank is the only one doing the same, offering that full suite of licenses and technology and combining the full product parts and capability to cover that."


Who is looking for Banking-as-a-Service?

Answering the question of who is looking for Banking-as-a-Service, narrows down to Aion Bank's belief that "in the 21st century, consumers and customers, in general, don't need another bank but need good banking."

Kim: "In the past 12 to 18 months, we've seen a huge demand and traction of organisations approaching us to ask whether we can help them with a white label technology solution, offer them to render our license to them, to help them fulfil the delivery of financial services in whatever context."

"In general, we serve any brand with a big community or a large customer base because BaaS is on top of their agenda for them. They built an excellent ecosystem and look for ways to grow the loyalty of their community. By adding financial services to their portfolio, they can keep customers closer", explained Kim.

"Research by JP Morgan showed that if you embed payments in an ecosystem, the average revenue per customer grows times two, times five. Large brands are very well aware that if they can keep the UX and checkout process smooth and easy, while adding financial services, it ultimately materialises in euros and dollars."

Next to retailers and corporates that wish to offer financial services to their clients, Aion Bank and Vodeno also support Fintech companies and banks in developing new, innovative products. Sometimes they are insufficiently licensed, or they miss the right technology to create new innovations in-house, in which case they can decide to partner with Aion and Vodeno.


How did Aion Bank help its clients so far?

The wide range of examples of Aion Bank's BaaS solutions made this session so extremely interesting. Instead of bursting buzzwords about the possibilities, Kim shared real-life examples.

She explained: "We allow our customers to innovate. Typically, they have the community, and they have the consumers. They remain their customers. We are kind of invisible, so to speak. We deliver the building blocks for them to build the experience."

Take this first example in the payments sphere: Aion Bank and Vodeno helped Tricount, a Belgian expense management solution. Building on the AIS (Account Information Services) and PISP (Payment Initiation Services) capabilities of PSD2, Aion Bank helped Tricount with their onboarding and the possibility for the users to pay their expenses directly through the app.

Another interesting case is one of the European retailer Metro. This company is using the BaaS technology to issue decoupled debit cards. These cards allow the retailer to issue Metro branded debit cards without the pain of account management, as these cards are directly connected to the end customer's preferred current account at their preferred bank.

Also related to payments, but completely out-of-the-box is the solution "Pay-with-portfolio" that Aion Bank and Vodeno built for UnitPlus. The idea is that people can invest their money in an ETF portfolio which is connected to a card the can be used to pay with the amount they invested.

Kim "We provided a daily payment instrument for shopping, and as long as the money remains untouched, the money is actively growing on the financial markets, instead of sitting on a current account without any interest".


What's next for BaaS?

Kim expects today is just a start: "Youngsters don't have a problem using financial services offered by a brand. They don't mind taking a loan from retailers or e-commerce platforms. And so, there is no reason large ecosystem players can't buils new value propositions based on financial services. We believe these brands will ultimately take over traditional banking."

She expects that demand for BaaS will further increase. Organisations will find new brilliant innovations, building on today's technology and their own community. Likely, we will see more banks jumping on the train, although Kim doubted many have the proper technology stack to succeed.


Conclusion

Personally, I loved this session. We got a couple of great examples of how a bank can reinvent banking, of how a bank is preparing for a world without banks.

Although I am not convinced today that platforms and brands will take over traditional banking completely one day, I remain hungry and curious to hear how this evolves in the future. The shared examples made me curious to follow up on what new creative ideas will see the light using Banking-as-a-Service.

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