BLaaS provides businesses the technology to offer lending to their business customers, additional lending programs they may not currently carry, and other benefits.
As a business, it’s not enough to merely “keep up” with the trends.
So, when US businesses hear that $70 billion of total banking revenue in Europe was associated with open banking, their ears should perk up.
Co-brand business lending and business lending as a service (BLaaS) are significant components of open banking and have driven the surge in Europe. The early European adoption and success with these approaches have provided crucial evidence in favor of the two statements below:
Even better, while BLaaS doesn’t yet have a stronghold in the US, the country is at a tipping point with how it views financing.
The US business landscape is clamoring for alternative financing options, with 20% of surveyed companies across the nation saying they lost faith in banks during the pandemic. What’s more, US businesses that get involved with BLaaS and co-brand lending will be ahead of the curve. They’ll be on the ground floor of an industry with a projected compound annual growth rate of 26.33% from now until 2028.
Still, those seeking co-brand business lending solutions must be informed to make a wise investment. So, read on to learn more about this topic.
To understand co-branding in banking, you must fully grasp co-branding as a concept.
The general act of co-branding involves a company throwing its own label or brand on a third-party manufactured product/service, then marketing it as its own. Co-branding happens more frequently than most know--but that’s the reason it exists in the first place. A business’s customers aren’t supposed to see the difference.
Through this method, brands offer customers new experiences without investing time and resources into product development.
A co-brand banking system operates based on the same principles. Banking as a Service (BaaS) leverages an existing bank’s application programming interface (API). By doing so, a company develops financial products of its own. But it’s all over an infrastructure that already exists within a licensed institution. You’re paying for a complete product to make your own--almost like a template or blueprint.
Whoever receives the co-brand lending platform or BLaaS gets to do whatever they want with the completed product. That includes putting their logo on it. It also helps them create a superior customer experience without the hassle of pouring endless resources into a new product.
Co-brand business lending, BaaS, and BLaaS are closely related and are often used interchangeably. But they aren’t all one and the same.
General co-brand banking (instead of lending) has been around for a long time, even before the digital transformation. It can exist outside the realms of current technologies and was relatively popular for consumers to obtain mortgages until the economic crisis in 2008.
The pre-packaged BaaS framework is responsible for modernizing co-brand banking, and it includes the following three-layered technology stack:
Now onto co-brand lending or BLaaS.
Lenders - co-brand or otherwise - can specify for whom their loans are meant. In the case of BLaaS, you’re catering your loans to businesses.
With that said, BLaaS is almost exactly the same as BaaS--it just revolves explicitly around business lending.
BaaS, co-brand lending, and BLaaS help businesses as both customers and service providers themselves. Read on as this section details how organizations can benefit from these technologies:
The traditional business loan process from a standard bank can take up to two months. On the heels of a pandemic, when organizations of all shapes and sizes need money fast, this simply isn’t good enough. A streamlined borrowing process is more appealing - and necessary - than ever.
To the above point, research from 2020 showed that the median small business had $10,000-plus worth of expenses per month and only two weeks of cash on hand. These companies have already gone through mass layoffs and closures. On top of all that, government-funded relief programs are a slow-drip process due to bureaucratic hurdles such as establishing eligibility. Plus, rising cases and overall unpredictability related to shutdowns, economic changes, and consumer behaviors mean financial assistance might be needed in an instant.
COVID-19 also highlighted that the bulk of credit unions and banks focus, primarily, on serving larger companies. In doing so, they neglected small business owners who grew to resent these institutions.
The truth is, banks and credit unions weren’t ready for how much lending activity there would be. Their lending systems were ill-equipped and outdated for a landscape in a state of non-stop evolution and flux.
With BLaaS, smaller businesses won’t get the runaround. These environments offer a seamless customer experience with little to no headaches. From flexible payment options to expedited approval, business owners have access to funding how they want it and when they need it.
Moreover, business owners procuring these loans can do so from the comfort of their home office. Given the stresses of a post-COVID world, the ability to maintain social distance is always a plus.
Companies don’t need to be caught in a financial bind to procure and benefit from BLaaS-generated funding. Things could be moving and shaking at your company. Yet, a growth opportunity might present itself that’s just outside your budget. In which case, BLaaS can be there for your business with a near-instant loan, so it doesn’t miss out on a chance to gain a competitive advantage.
82% of small businesses shut down because of the poor management of cash flow. Worse, those who need funding are often left in the cold unless they have perfect credit. Only 65% of small business loans were approved in 2020, leaving a void in the market your business can fill.
Adding BLaaS gives your B2B clients a 1-stop-shop for financing and purchasing. Potential buyers won’t sit and wait, desperately hoping the bank approves their loan application. They’ll instead be able to make a purchase right away.
That’s one reason why the BaaS model reduces customer acquisition costs by 95%. You’re streamlining the buying journey, removing costly marketing/sales touch points as your clients seek financing solutions. That means less time and money spent converting leads.
You’re also adding another revenue stream for your company, further cutting into customer acquisition costs.
Here’s a stat worth considering:
The kicker is you have to earn these consumers’ loyalty. They’re known for being very picky with their go-to brands. But millennials and Gen Z-ers are the more digitally-forward demographics and are therefore likelier to leverage BLaaS solutions. Further speaking to this notion is how 60% of millennials identify as entrepreneurs--the type of individuals who need business funding.
Additionally, this group is looking for convenience-based products and services that speak to their digital-forward lifestyle. Look no further than Uber. Just like Millenials and Gen Z-ers got sick of dealing with Taxi companies, they’ve grown equally impatient with banks.
By streamlining the financing process for your clients in need of cash, you’re generating goodwill amongst your base. They’ll appreciate the diversity of your services and associate convenience and a seamless experience with your brand.
There’s then the advantage of no other brands intervening with the purchasing process. Customers aren’t running to different lenders to procure your products and services. Instead, they’re spending more time with your organization, fully immersed in your marketing message, increasing the likelihood that your business remains top-of-mind.
Conversely, suppose your business has a financing partner. In that case, your partner’s branding ends up on your web page, taking the attention off your business. In a world where the cost of customer acquisition has risen over 50% over the past half-decade, you can’t afford to market someone else’s brand. All your marketing and branding efforts should solely center around your company.
One BaaS solution provider cites their clients enjoying 5-times the sales and a 172% yearly revenue increase when using their co-brand technology. Those are immediate, tangible results.
Co-brand lending products can reach the market at lightning speeds. Your concerns strictly revolve around branding and marketing and nothing else.
This speed-to-market allows you to get a leg up. You’ll get your BLaaS-based product out there before your competitors can conjure up something similar.
Companies contemplating getting into co-brand business lending should consider the following factors before aligning with a BLaaS provider:
Every dollar invested in a business should be scrutinized. All purchase decisions must be well-informed--and your BLaaS solution should be no different. You don’t want to purchase a co-brand business lending product from a company with a terrible reputation. After all, it’s actually your reputation that’s on the line.
This process won’t be too tricky, though. Reviews are rampant for almost all products and services through a quick Google search.
Whether you’re only purchasing a co-brand, BLaaS solution or a broader BaaS product, it has to make sense for your business. Ensure what’s offered fits the needs of your business and that your customers would actually be interested.
When you purchase co-brand business lending solutions, you’re also investing in a partnership with your provider.
Therefore, details like whether the provider owns the APIs/solutions themselves or if there’s third-party ownership are tidbits you should know. Such information can impact your partnership as it evolves.
It’s a universal truth that businesses constantly change and evolve, or at the very least, they should. What separates successful organizations from those that fail is adapting to the continually changing landscape.
So, while someone might offer a BLaaS solution that makes sense here and now, it might not be the best long-term solution. You must ensure your potential partner has a scalable system. That scalability is highlighted by the provider having a substantial tech stack, comprehensive resources, and the enduring stamina needed to grow with you and your client base.
Keep in mind, too, that it’s not just your business that will grow and evolve. So will your potential partner’s company. You must be confident they’ll be there for you as your needs increase when their own client base expands.
Your provider needs to offer you a co-brand business lending product that can reach the market ASAP. Otherwise, it defeats the purpose of a co-brand investment. You need something that can make an immediate impact. That won’t happen if you have to sit around and wait for months for a final product.
Loanspark is revolutionizing BLaaS. It’s Time to Get in on the Ground Floor of Co-Brand Business Lending
The benefits of BLaaS for your business are clear. It’s time to embrace the future so you don’t miss out on this lucrative opportunity. Schedule a chat with the Loanspark team today to solidify your company’s tomorrow.