Operational Efficiency: The Next Frontier For Fintech

Meaghan Johnson Forbes Fintech Contributor
I’m a fintech advisor obsessed with customer-centric products
Ugne Buraciene, Group CEO of payabl.
Ugne Buraciene, Group CEO of payabl.

In 2023, three key themes dominated the European fintech landscape: a funding slowdown, a sharp focus on profitability, and increasing pressure from European and UK regulators on the BaaS and Embedded Finance ecosystem. On the surface, several high-profile restrictions on licensed entities appear worrisome for European fintech, given how pivotal the ecosystem has been for increased competition, cheaper costs to serve, and far superior customer experiences. Despite the restrictions, 2024 may be a year in which the BaaS and EmFi ecosystem pivot to a rather unsexy part of fintech, enhancing operational efficiencies for fintechs and digital brands.

Operational Efficiencies Are An Untapped Use Case

Historically, BaaS and EmFi have served as the foundation for consumer-facing fintechs and as a means for big brands such as AppleAAPL -0.5%, IKEA, UberUBER +14.7%, and Cathay Pacific to explore new revenue streams and expand their consumer or micro-SME product offering. However, since 2023, there has been an increasing trend in brands, fintechs, and businesses to tap into the operational efficiencies BaaS and EmFi can offer. Adrian Klee, Partner at Ross Republic, a European Strategy Consultancy, believes the era of operational efficiency is here. “While most BaaS players have historically focused on providing the operating system for customer-facing propositions, we’re seeing a strong pivot towards unlocking new innovative use cases that streamline and automate internal operations.”

payabl. is one fintech looking to support businesses in creating operational efficiencies. At the recent Forbes Cyprus Future of Fintech Summit in Limassol, Cyprus, Ugne Buraciene Group CEO of payabl., shed light on the importance of having an EMI license. At the time, payabl. held an EMI license issued by the FCA in 2023 and was recently awarded its second EMI license by the Central Bank of Cyprus. While those in the industry tend to focus on high-profile brands and embedded finance and BaaS partnerships, such as Apple and Goldman Sachs or IKEA and Afterpay, Buraciene highlighted the potential of embedded finance from an infrastructure perspective. “From an infrastructural perspective, Banking as a Service (BaaS) can significantly improve business backend operations, streamlining operations, reducing costs, and avoiding errors.

Ugne Buraciene, Group CEO of payabl. at the Forbes Cyprus Future of Fintech Summit 2023

Buraciene also shed light on some opportunities payabl. capitalized on with their UK EMI license, “When payabl. was granted an EMI license in the UK in 2023, it allowed us to bring additional offerings to market that we already had in place in other countries, including merchant acquiring for VisaV+0.6%, MastercardMA+1%, and American ExpressAXP+0.6%, POS systems, payment accounts, and linked payment cards. These extra services allow merchants to improve their payment offering for their customers, without the cumbersome management of multiple payment providers.”

Endless Opportunities, Unlimited Verticals

EmFi and BaaS offer almost endless opportunities for operational efficiencies across a diverse range of industries. One use case includes virtual cards, as Klee explains. “For instance, an operational pain point for logistics companies is to equip drivers with a simple way to pay for unexpected expenses to ensure vehicles get back on the road as soon as possible. Drivers can access virtual cards through their mobile phones, which can be a massive efficiency boost here.”

The counterpart to virtual cards, virtual IBANs (international bank account numbers), are an excellent example of operational efficiencies from an EmFi or BaaS play. Buraciene explained, “Virtual IBANs enable businesses or individuals to send and receive money using unique payment details. The difference between virtual and regular IBANs is that with a vIBAN you can have multiple unique vIBANs holding balances within the same underlying mutual account. It functions as a linked sub-account connected to a central account, allowing payments to be easily routed and reconciled in various ways.”

Two areas of fintech are especially ripe for embedded vIBANs: crowdfunding platforms and crypto exchanges. Buraciene explained, “A clear example of how a virtual IBAN could help business efficiency would be a crypto exchange, in which they must manage their clients’ fiat balances separately from their operational funds. They also must manage their clients’ payments from fiat to crypto and vice versa. Reconciling all those payments is resource intensive.”

The need for easier reconciliation extends beyond fintechs. Klee highlighted the need of Embedded Payments for reconciliation efficiencies in the professional services industries. “Manual reconciliation and payments are a huge pain point when serving hundreds of accounts, which can be solved very efficiently through virtual cards and accounts mapped to clients or projects. The appetite for embedded finance in such industries is driven by a digital shift of corporate operations, finance, and treasury functions, which seek innovative BaaS providers that can sync with their banks, ERP, internal tools, and payment providers in real-time. This allows to build entirely new internal workflows and automation that previously required significant manual work.”

Embedded Lending manifested via BNPL and credit cards is perhaps the most mature area of EmFi. However, there is increasing scope to use lending for enhanced operations. Klee believes it is an equal frontier to vIBANs and cards and payments. He highlights existing use cases. “Some of our e-commerce clients rely on meticulous inventory and sales forecasting to ensure they meet demand. There’s often a mismatch between expected orders and cash on hand to purchase enough inventory. This unique challenge requires a strong tech DNA to underwrite programmatically to automate loan processing and repayments, a segment that lending-focused BaaS players are poised to take over.”

payabl. too is gearing to leverage EmFi and BaaS to enable businesses to streamline operations, reduce costs, and enhance customer payment experiences. The company strives to elevate the payments industry with the introduction of a platform that unites the entire suite of payabl.’s payment solutions in one single portal.​​

“With one authentication and API, our merchants can take, make, and manage payments, apply and activate new products, and access robust reporting and insights. This will offer merchants of all sizes a single solution to all their financial needs, from acquiring to banking and issuing in one single platform, reducing the need to work with multiple providers that might not communicate well,” explained Buraciene.

The Critical Success Factor: Keeping Consumers Safe

The financial services industry ranks as one of the most regulated for valid reasons. As EmFi and BaaS continue to unlock immense potential for better customer and operational experiences, it’s essential to maintain “good friction” to ensure the safety of customers and businesses. Buraciene emphasized the pivotal role of EmFie in driving greater innovation and bolstering security in the payments arena. “Innovation in the payment ecosystem must prioritize consumer convenience and safety. Embedded Finance enhances convenience by integrating financial services within non-financial apps, enabling users to access more products in one place. It also promotes safety and accelerates innovation for marketplaces and businesses. By partnering with licensed providers, merchants can quickly introduce new financial products, leveraging the providers’ expertise in security and regulatory compliance.”

EmFi and BaaS introduce several tensions within financial services. They catalyze innovation and allow any company to become a fintech. Still, in the end, consumer protection must be front and center of any EmFi or BaaS play. Klee believes successful plays will be done to find this balance between innovation and customer protection.

This shift to operational efficiencies promises to streamline backend operations, reduce costs, and enhance customer experiences while redefining the essence of what BaaS and EmFi can offer beyond consumer-facing solutions. The potential for operational innovation spans virtually unlimited industries, with virtual cards, IBANs, and embedded lending presenting just a glimpse of what’s possible. However, maintaining a delicate balance between innovation and consumer protection becomes paramount. The move towards operational efficiencies signifies a maturing fintech industry looking inward to find new growth avenues while keeping the consumer’s safety at its core.


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