Close up young woman putting signature on banking loan document in office. Successful businesswoman signing contract or purchase document with partners at meeting after negotiations and making edits.

Why licensing matters: how banking licences impact embedded finance

The following is a guest post by Nikhil Sengupta, Global Sales Director at Vodeno.

As Banking-as-a-Service (BaaS) advances towards mainstream adoption, BaaS-enabled embedded finance has shown it can give businesses a competitive edge.

Vodeno recently surveyed more than 1,000 business leaders in the UK, Belgium, and the Netherlands to ascertain their impressions and experiences of BaaS-enabled embedded finance.

It found that 64% of the respondents believe BaaS offers lucrative opportunities to businesses and that more than half (51%) find that consumers will engage with financial products offered by the brands they use every day as opposed to traditional branch-based banking. 

In bringing these products to market, the banking license a BaaS provider has access to plays a key role.

The importance of banking licenses was reflected in Vodeno’s survey, with 28% of business leaders citing that they would like to see their BaaS provider offering access to a banking license as a priority. In comparison, 58% believe that providers with a banking license alongside their tech solution will shape the BaaS market in the future.

As embedded finance grows in prevalence and popularity, businesses must consider BaaS and understand the impact different licenses offered by providers will have on their offerings. So how does it work?

Indian female agent helping client sign the application document

Why a banking license matters in BaaS

Financial products that are seamlessly integrated into businesses’ ecosystems and can meet the consumer at the point of need are the value of embedded finance.

BaaS providers must have API-based technology and the proper banking license to offer a comprehensive suite of products.

Take, for example, the Electronic Money Institution (EMI) license. A BaaS provider with this license enables their partners to embed payment services into their ecosystems, such as transferring funds between accounts, settling purchases, and issuing electronic money.

Alternatively, a full ECB (European Central Bank) banking license allows providers to offer a full scope of financial products and services, which can give the client the ability to offer customers more choices and a better overall customer experience.


Popular flexible credit products like Buy Now, Pay Later (BNPL) increases consumer spending power and reduce the hassle of seeking third-party solutions. BaaS providers with a full banking license only offer lending solutions like this.

As embedded finance gains popularity across multiple sectors and use cases, the BaaS providers that can offer a comprehensive set of products due to the right license will drive innovation in the market.

Why you should BaaS adopters care about banking licenses

Adequate embedded finance is all about meeting customers at the point of need – whatever that need might be – so in the end, offering a comprehensive set of embedded banking products will set brands apart.

The type of banking license will determine which products a BaaS provider can offer, and only those with a banking license can provide a comprehensive set of BaaS products.

As businesses vie for consumers’ attention, offering a full range of embedded finance solutions might be the difference between sink and swim for some brands. Finding the right BaaS partner with the right banking license will be critical to success.