Jean-Jacques Le Bon, Vodeno: How can branch licences unlock new value for BaaS adopters?
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Payments, finance and banking are constantly shifting and evolving sectors. It is hardly uncommon for new and innovative methods and technologies to come to the forefront across these industries.

Open Banking, AI, embedded finance and Banking-as-a-Service (BaaS) are all prominent examples of these. Sharing his views with Payment Expert, Jean-Jacques Le Bon, Chief Strategy & Product Officer at Vodeno – the BaaS firm backed by NatWest Group, discussed how BaaS adopters can unlock new value.

Jean-Jacques Le Bon, Vodeno – Source: Vondeo

More and more non-financial businesses are partnering with Banking-as-a-Service (BaaS) providers to take advantage of embedded finance. 

It has been a defining financial services trend of the past few years, which accelerated post pandemic. The value for BaaS adopters is clear – seamlessly integrating financial products into businesses’ ecosystems that customers can access at the point of need enhances the user journey, fuels loyalty and creates new commercial opportunities.

It is crucial, however, that adopters carefully consider a prospective BaaS provider’s licence as this will dictate the embedded finance products it can deliver.

Generally speaking, a BaaS provider will have one of two types of licence, and there are important distinctions between them.

  1. Payment or Electronic Money Institution (EMI) licence: this enables a BaaS provider’s clients to embed payment services into their ecosystems, such as transferring funds between accounts, settling purchases and issuing electronic money. 
  2. A banking licence: this enables a much broader range of solutions, such as accounts, the ability to hold deposits and offering lending solutions like Buy Now, Pay Later (BNPL).

Both EMI and banking licences have the ability to passport services across the European Economic Area (EEA), with the corresponding IBANs that are connected to each product determined by the origin of the home licence.

For companies wanting to offer services to countries outside the EEA, or wanting access to local IBANs, establishment of a branch plays a crucial role.

What is a bank’s branch and why does it matter?

Establishment of a branch in a specific country gives access to local IBANs and local payment schemes. 

For BaaS adopters, access to a branch signals a permanent presence in that country, which, in turn, ensures the company complies with its rules and practices in areas such as anti-money laundering (AML), customer onboarding and the marketing of financial products and services.

For BaaS adopters, partnering with a provider that holds relevant branch licence can unlock opportunities that could otherwise be closed off, here are some of the most important. 


Payments is the most common use case of BaaS, driving embedded finance adoption and transforming how consumers and businesses make transactions.

A recent report by Juniper Research delved deeper into this trend, highlighting how an increasing number of BaaS and embedded finance adopters are taking advantage of payment rails – the infrastructure that allows money to transfer between a payer and a payee – including SEPA, CHAPS, BACS, ACH, and SWIFT, in order to facilitate instant payments on a domestic and global scale’. It added that the use of multi-rail payments ‘means that even more payment methods are acceptable for transactions, reducing the likelihood of cart abandonment within eCommerce contexts’.

Banks having their branches in other EEA countries can be a game-changer in the payments arena. Thanks to their access to local payment schemes, they accelerate the speed at which payments can be made, reducing friction and cost for transactions.

Take the example of a business offering embedded financial solutions to customers in a country outside the Eurozone, such as Poland. If its customers want to transact in Polish Zloty and have access to Polish IBANs and payment schemes, the business must partner with a BaaS provider that holds a Polish branch. Without the branch and access to local IBANs and payment schemes (Elixir, Elixir Express, for instance), customers will incur increased transfer costs – potentially five to ten euros in FX or transaction fees via SWIFT.

By contrast, BaaS providers with a Polish branch could offer its clients virtual IBANs based on their Polish IBAN, allowing the business to accept payments in the currency of the payer and receive them into a local-currency bank account, cutting out FX charges that come from converting every single international payment. 

Regulatory compliance

As noted, a branch is only available to a company that is permanently established in that country. From a regulatory and compliance perspective, this is important, underlining that the BaaS provider satisfied strict regulatory criteria for the particular country or territory served by that licence.

In the highly regulated banking sector, BaaS adopters naturally lean heavily on the expertise of their BaaS provider to ensure embedded finance deployments are fully compliant. 

Again, the banking licence will determine which products are available to a BaaS provider’s clients. But, in ensuring there is constant regulatory alignment, and the customer protection that comes from rigorous oversight from local authorities, the branch licence will equally underpin long-term success once the embedded finance product is launched. 

Penetrating new markets

Branches are important for businesses wanting to establish themselves in local markets. There are critical advantages with respect to the ease, cost efficiency and speed of doing transactions in different countries that only branch banking licences can unlock. 

Particularly in the payment space, in order to create a truly frictionless payment network across Europe, BaaS providers must give their clients access to local IBANs and payment schemes. 

As the BaaS market has matured – and continues to do so – a deeper appreciation for the vital component of licensing will drive the sector forward. The best strategies and tech are nothing without the foundations of the right licence.