"A symphony of simplicity - that's what we're creating with embedded finance." -Sarah Howell

The financial industry is changing at a rapid pace, and any advantage can provide a competitive advantage.

What if your biggest advantage came from a new partnership? Partnerships can create exciting new experiences for customers that keep them loyal for the long haul.

That’s the topic of a conversation with James Robert Lay, author of Banking on Digital Growth and founder of the Digital Growth Institute, and Sarah Howell, Chief Alliance Officer at Nymbus. Sarah is devoted to simplifying the customer experience with the help of BaaS.

What Exactly is BaaS?

Banking-as-a-service (BaaS) has become an overused and over-discussed concept in the financial world, yet many people still misunderstand it. On the simplest level, it’s a way of tying a non-chartered entity - a tech company - to a chartered financial business.

In practice, BaaS is about offering customers new products and options that create value within the customer experience. It’s a way of providing something unique that forges a stronger bond between the customer and the financial brand.

BaaS is a form of disruption in the financial world that many companies are still struggling to accept. It’s part of a larger ecosystem that includes other disruptions like regulatory changes, social reforms, and changing customer tastes. BaaS provides an additional channel that often speaks directly to the end user and gives them a new form of financial experience.

New Opportunities Through BaaS Partnerships

It would be easy to see BaaS partners as potential competitors. But when you view them through the lens of partnership rather than competition, a new horizon appears. New opportunities abound.

For example, a BaaS partnership can provide additional brand equity that comes with new product lines and offerings. Now you have something new to share with your existing customers and new possibilities for attracting additional customers.

This gives rise to new growth that further boosts the company’s resources and provides even more options for partnerships. Look at a company like REI or Chewy. They’re strong affinity brands that have built-in communities.

What if your company could partner with a brand like that and gain instant affinity?

These are the kinds of opportunities Sarah and Nymbus are constantly seeking. They look for partnerships that involve education, lowering barriers, and deepening connections with customers. 

Simplifying the Complexity of FinTech

The digital world is confusing for financial customers and workers alike. But complexity isn’t in our nature. Human beings are drawn to things that are simple and easy to understand.

How do we bridge this gap?

Sarah likens it to parenting. It’s important to be direct, empower people, and set the stage for growth. Sometimes the simpler the solution, the better.

Meanwhile, it’s important to look for all possible opportunities to deepen the customer connection to the brand. Drive engagement and look for customer needs that are going unfulfilled.

Look for “the probability of the flip,” how likely an existing customer will be to turn to your company in a moment of need. When they next need a new financial product, will they come to you? The further your company is from the end customer, the greater the risk that they won’t think of you. 

Practical Considerations for BaaS

With so many BaaS options in the digital marketplace, it’s important to narrow your scope and decide what’s right for your company. Consider where your guard rails are as a financial institution and decide how big your risk appetite is.

Work closely with your institution’s risk and compliance person to ensure they’re educated about BaaS and understand what it would take to move into a new space.

Could certain decisions put your charter at risk? What other risks might you face? Are they worth it?

Remember, this may involve some retraining of the risk and compliance person to understand the digital space and be willing to move forward with courage and confidence. A risk-based mindset is often too tentative to take any risks at all, but this could be a huge opportunity for your company.

Consider organizational silos too. Don’t get stuck in a certain vertical because your internal groups aren’t used to collaborating. Do you have an innovation lab? Can you work cross-functionally? 

Pinpoint the issues that are preventing you from scaling up. How are business silos at your organization stifling what would otherwise be an innovative and lucrative venture?

The larger the organization is, the harder it typically is to bring in new ideas and give them life. But small institutions often suffer from the same thinking. They say, “We’re just too small” while their competitors are saying, “We’re just too big.” Everyone is frozen in place.

Just like the big dogs, small to midsize banks should view their size as a competitive advantage. With a smaller scope, you can often be more nimble and move fast in an ever-changing marketplace. Don’t get stuck in a certain mindset purely because your institution is a certain perceived size.

How to Go From Traditional to Exceptional

Imagine a traditional banking brand that’s been around for 30 to 50 years. They’re wondering how to begin a BaaS journey and play all their cards right.

The first step in the journey could be co-branded credit cards as BaaS offerings. Build this bond with your customers. Then look at scaling to additional financial products and begin to build a 360 view of your customer. 

Meanwhile, make sure you’re managing your data well and mining information from it. Start having conversations about other options you could explore moving forward. Talk to your internal people that are working on the new programs and see what they say. Is it working? Do people love it? Tap their brains and see what new insights are available.

Take a look at other companies outside the banking space like Uber and Gusto. These companies offer constant rewards. They offer benefits like faster payments, seamless account opening with QR codes, and other things that enhance the customer experience. Is your brand doing this too?

Think about what it would take to encourage a customer to just come into your brand and explore. Imagine them being open to new ideas from you. What would you pitch to them quickly, without scaring them away? Chances are, it’s something simple that would pique their interest.

To move your financial institution from traditional to exceptional, you’ll have to remove the friction from the process. As Sarah puts it, today’s consumers want a “symphony of simplicity” - and that’s the goal of BaaS and embedded finance.