The Hidden Risks Of BaaS And Embedded Finance: Inside Apple’s Struggle

The honeymoon between Apple and Goldman Sachs may be over. Recent complaints from Apple Savings customers about their inability to quickly withdraw funds and encountering “rude” customer support staff from Goldman Sachs have awakened the trillion-dollar company to some of the challenges of partnering with a BaaS or Embedded Finance (EF) enablers. For a company like Apple, known for its impeccable customer support, the impact of these complaints could pose a risk to the exceptional customer experience Apple provides its users.

BaaS and EF continue to revolutionize and democratize financial services, and many are taking note. The global embedded finance market valued at USD 65.46 billion in 2022 is expected to grow at a compound annual growth rate (CAGR) of 32.2% from 2023 to 2030. From the surface the benefits are clear; reduced costs, quicker time to launch, out of the box tech, with regulatory and compliance requirements met.

Having worked on both the supply and demand side of BaaS and Embedded Finance, challenges will always arise once the product is live, such as managing edge cases and restrictions on product development, as brands are tied to the BaaS or EF enablers product roadmap.

The Wild Card: Customer Support

Perhaps the most underrated challenge is handling customer support. Founders, CPOs, and CTOs primarily focus on the product and how to achieve product-market fit. They often overlook or do not prioritize the customer support function, which is critical for maintaining customer loyalty and a solid customer experience. BaaS and EF enablers are B2B companies, and their customers are not end-users. Therefore, BaaS and EF enablers tend to have customer success managers or partnership managers rather than a strong customer support team to help query end users problems.

What customers of Apple Savings experienced is not out of the ordinary. Customers who interact with the customer support team of the BaaS or EF enabler often experience waiting periods of days, sometimes weeks. Even when a fintech or brand has an in-house customer support team, sometimes the request is redirected to the BaaS or EF enabler, again leading to long response time and frustrated customers in what can feel like a disjointed experience.

Knowing The Flow of Funds and Compliance Requirements

Another challenge that fintechs and brands cannot escape is the often complex flow of funds model and regulator complexity faced by their BaaS or EF enabler. This is particularly true for multi-currency or multi-market fintechs that use multiple BaaS providers. A recent story involving a business owner chasing the fintech they used for their business account for two months. Funds meant to be returned to the user account, a German IBAN, were instead sent back to the custodial bank, an Estonian bank. It took two months to resolve the issue, without any clarification of what was wrong.

Often, customer support at the fintech and brand are not up to speed with the intricate workings of the BaaS or EF enablers’ partners and regulatory set-up. In Apple’s case, one customer complained about an “absolutely ridiculous experience where Apple Savings wouldn’t let me withdraw to one of the bank accounts on file as it wasn’t the account the funds originally came from.”

Goldman Sachs’ Nick Carcaterra commented on the recent complaints, stating, “The new Savings account for Apple Card users has received excellent customer response, exceeding our expectations. While the vast majority of customers experience no delays in transferring their funds, in a limited number of cases, a user may experience a delayed transfer due to processes in place designed to help protect their accounts. While we would not comment on specific customer interactions, we take our obligation to protect our customers’ deposits very seriously and work to create a balance between a seamless customer experience and that protection.”

The customer’s frustration could have mitigated by providing assurance around the funds, details of why the withdrawal was not approved, and why this is an important safeguard by Goldman Sachs to keep customers fund safe. The Apple user sees this as a massive inconvenience, but in the end, it is done for the customer’s benefit.

How to Create a Win-Win

Working with a BaaS or EF enabler has pros and cons. For any brand or fintech on the path to such a partnership, a customer support strategy should be an absolute priority, and the following points can be considered when building a strategy:

1. Always opt to staff your own customer support over the BaaS or EF enabler. This allows you to own your tone of voice and ensuring you have a complete handle on the situation. In Apple’s case, the user felt that the Goldman Sachs customer support agent was “lecturing” him, posing a considerable risk to maintaining Apple’s overall customer experience.
2. Provide the right amount of information when it comes to the flow of funds queries. The perception of “lost money” among customers is highly triggering and concerning. Transparency and ensuring customers that their funds are not lost will be critical to retaining customers who go through this experience. Re-assure them that measures are taken to protect their funds.
3. Equip your product and customer support teams with the basics of banking. Explain how inflows and outflows of funds work, what parties are involved, and when a potential delay could occur. While this may seem obvious, there often needs to be more knowledge between the product owner at a brand, and the compliance or tech teams of a BaaS or EF enabler.

While BaaS and EF hold immense potential, recent issues between Apple and Goldman Sachs underscore the importance of prioritizing customer support and understanding the complexities of fund flows in such partnerships. By addressing these challenges head-on, brands and fintechs can navigate the embedded finance landscape while delivering exceptional customer experiences.