Neil Chandler, CEO of Aion Bank, recently shared his opinions with CI on the evolution of Banking-as-a-Service (BaaS) and why he believes we are primed for BaaS 2.0.
Change is afoot in the embedded banking space – BaaS is transitioning from its former status as a fintech-led, poorly regulated model to a more responsible, bank-driven era. We’ve seen the focus of the media shift from eye-watering fintech valuations to embedded finance-powered customer loyalty and concerns about regulation and compliance. So what’s in store for bank-backed BaaS 2.0?
Continuing the momentum from Aion Bank’s recent acquisition by Unicredit, Neil has explored his predictions for the next stage of BaaS; challenges such as an evolving regulatory landscape, and the potential benefits, like end-user customer acquisition and retention.
Our chat with Neil Chandler is shared below.
Crowdfund Insider: Talk about your background, how did you find your way to Aion Bank?
Neil Chandler: I actually started my career as a software developer before I found my way to financial services. My career in banking began at HBoS, eventually becoming the CEO of HBoS Loans, then I served as CEO for Sainsbury’s Bank, at the time a JV between Sainsbury’s and HBoS. Next, I spent nearly a decade at Shop Direct (owner of brands including Littlewoods and Very) in a variety of roles, and served as CEO of Shop Direct Group Financial Services. I oversaw the integration of financial products, as well as IT/digital transformation efforts for the Group.
Prior to Aion Bank, I was CEO for Vanquis Bank (part of Provident Group plc).
What drew me to Aion Bank was its position as a leading European Banking-as-a-Service provider. BaaS combines innovative technology with bank licensing to make financial products more accessible to people through retailers and other consumer brands they use everyday. What I love about the promise of embedded finance is that it puts the customer at the centre and reframes how people perceive and engage with financial services.
Crowdfund Insider: Tell us a bit more about Aion/Vodeno.
Neil Chandler: Aion combines with Vodeno’s proprietary, blockchain-based, cloud-native core banking platform to offer a comprehensive suite of embedded banking products based on our full banking licence.
Unlike other platforms and mid-scale lenders, we offer a fully integrated end-to-end BaaS, including tech stack, banking licence and compliance and regulatory expertise. Through the combination of technology and banking licence, we can deliver financial services directly into the customer journeys of our clients, giving them the ability to create a better experience and meet their customer needs.
Crowdfund Insider: We have seen a few BaaS providers get into trouble with regulators, what makes Aion/Vodeno different?
Neil Chandler: The challenge with BaaS today is there is no single definition of a BaaS provider – some providers are strictly IT specialists, others hold licences limited to payment products, and a few (like Aion/Vodeno) offer full end-to-end BaaS with services based on a full banking licence. Today, BaaS has evolved and is available to offer its services to almost any enterprise, empowering non-financial businesses to seamlessly incorporate banking products directly into their websites or applications.
Many businesses have realised that by integrating BaaS solutions into their ecosystems, they are able to take advantage of greater speed and cost efficiency while providing a superior, more convenient experience for their customers.
Businesses considering BaaS must be aware of the importance of the regulation and compliance aspects of financial services, and they should not assume that every provider will take care of this for them.
In reality, which banking licence (if any) a BaaS provider has dictates the services they are able to offer just as much as their underlying technology.
What’s more, the compliance and risk management credentials of BaaS providers are not all the same. As a fully licensed bank and credit institution, supervised by the National Bank of Belgium, we take regulatory compliance extremely seriously – it’s in our DNA – and we are able to offer fully compliant banking products for our clients.
Crowdfund Insider: UniCredit recently announced their agreement to acquire Aion and Vodeno, why do you think this is important for BaaS in Europe?
Neil Chandler: The UniCredit news comes as the BaaS industry reaches an inflection point. BaaS is maturing; when it first burst onto the scene, the focus was on technology. But, this initial ‘tech-led, investor-fuelled, growth at all costs without much thought to regulation’ version of BaaS is dead, as regulators look more closely at the sector.
This is a good thing because BaaS is now entering a more responsible era, where licence, compliance and banking expertise are at the forefront. Ultimately, this will be better for the sector, as well as for the consumer. I predict, in the future, we will most likely see some BaaS providers struggle or shut down, but the sector will come out the other side stronger, with more capable fully end-to-end players.
We will also see more investment from larger banks into the BaaS sector. UniCredit’s announcement of their agreement to acquire Aion Bank and Vodeno is the first major European bank to recognise the BaaS model as a future growth opportunity and invest in its development. More investment in BaaS will mean more innovation and more adoption across different sectors.
Crowdfund Insider: Why is embedded banking having its moment?
Neil Chandler: Simple: consumer demand. Consumer behaviour toward financial services is changing – more people trust the brands they use every day to access financial services.
Research from Aion/Vodeno underlines these changing attitudes, particularly among younger generations. Our survey of over 3,000 European consumers found that 52% of 25-34-year-olds prefer using financial products and services from their favourite brands over traditional banks. The same number (52%) think brands are better than banks at offering financial products that are tailored to their needs.
As BaaS adoption has increased, and embedded banking has become more common within the customer journey, many consumers no longer think twice about embracing credit, cards, accounts or payment solutions from the brands they use everyday.
Customers benefit from access to banking products at the point of need, as well as other advantages like flexible payment options or cash back incentives. In turn, this creates exciting opportunities for businesses: by embedding financial services into their customer journeys, they can attract new customers, increase basket size, improve retention and loyalty, and generate new revenue streams.
Crowdfund Insider: What are some of the challenges clients are trying to solve?
Neil Chandler: Embedded payments and lending are the foremost BaaS use cases. The ability to offer a quick and frictionless experience when processing transactions is the foundation of any good customer experience. It is no surprise that giving choice in payment options is a common starting point when companies engage with BaaS providers.
Alongside payments and lending, BaaS providers with a full banking licence can also embed banking services, including accounts, savings and digital wallets. The best BaaS providers will also handle regulatory compliance, helping to navigate through complex (local) regulations. Yet, compliance requirements can vary significantly from one BaaS product to another – while requirements are relatively light for simple payment processing solutions, lending solutions like Buy Now, Pay Later (BNPL) are much more demanding due to regulations around the affordability and decision requirements for lending money to customers.
Ultimately, consumer appetite is driving BaaS adoption. BaaS puts the customer at the centre to deliver what they want. Just as no one wants a mortgage, they want to buy a house, no one thinks I want BNPL, they think I want to buy a pair of jeans.
Crowdfund Insider: What’s next for embedded banking?
Neil Chandler: There is clear consumer demand for embedded banking, and new innovation will make the delivery of these products easier, more cost efficient, with security and compliance at the forefront.
Artificial intelligence and automation
As AI tools become ever more sophisticated, the technology can underpin critical regulatory and compliance processes such as Know Your Customer (KYC) and Anti-Money Laundering (AML), as well as reduce the risk for the BaaS provider and embedded finance adopter through the continued deeping of credit risk modelling/AI. End users will benefit from a smoother customer journey through usage of technologies like self learning propensity models (e.g. next best action).
Blockchain and smart contracts
Smart contracts, built and run on blockchain technology, are integral to the future of BaaS and embedded finance.
Put simply: smart contracts automate business processes by executing the terms from the contract when certain criteria are met. This automation ensures a frictionless flow of events between the BaaS provider, client and end-user, creating a faster, enhanced customer experience. In the BaaS space, smart contracts play an important role in enhancing speed, flexibility and scalability when creating, modifying and delivering financial products and services to third parties.
PSD3 and regulation
PSD3 is all about making payments quicker, cheaper and safer. We’re already on this path, but where the regulatory landscape is concerned, there is increasing scrutiny around BaaS and embedded finance. PSD3, which is expected to come into effect in 2026, is the latest move to tighten up regulation – the regulatory expertise and licensing of a BaaS provider is extremely important and will dictate not just the range of fully-compliant embedded finance products that can be offered to a client, but also the ease at which products can be marketed and scaled.
