Episode 1: Value-Added Services (VAS): strategies, trends and insights

Michał Grela
Michał Grela
June 6, 2024


Hello and welcome to Speed Talks, the podcast about everything tech in the financial services industry.

Introduction to Today’s Topic

The topic of today’s conversation is value-added services: strategies, trends, and insights on value-added services for banks and financial organizations. Today, we want to look at VASes. That’s how I’m going to refer to value-added services in banking, and my core goal for today would be to assess what kind of value they can actually bring to the table for this sector. I will briefly go through the definition and the history of that instrument. I’ll talk through five values that VASes bring to the table. I will discuss five core groups of value-added services offered on the market at the moment, the most popular ones, the types, and just what’s out there.

I’m going to briefly go through a few tips on how to implement VASes best and have a quick look into the future of value-added services in the industry. My name is Michal Grela, and I’m the Head of Sales and Marketing at Speednet. I just can’t wait to jump right into the topic. This is the first episode of our SpeedTalks podcast, so that makes me even more excited. I hope you will enjoy it.

The Idea Behind This Episode

I just wanted to start with a few words about the idea of this episode. On a daily basis, when working, speaking, and networking with banks, the topic of value-added services always comes around. I mean, it’s a great way to extend the portfolio from the banking perspective, build an innovative banking brand, and build partnerships with fintechs and SaaS companies out there. At the end of the day, it is to increase profit and impact the bottom line. So, there are definitely a lot of birds that can be hit with one stone here. But yet, there is still relatively little content out there.

That’s why our marketing team has been working on a white paper recently about value-added services, and the idea for this episode is a kind of extension of this material. If value-added services are a topic of your interest, you will find a link to download this PDF white paper here in the description of this episode. You can also go directly to speednetsoftware.com, and you’ll find the material there at the bottom of the page. But let’s jump straight to the content then.

Definition and History of VAS

What is the state or value of value-added services in banking? And when I say value-added services or VASes, it’s good to be aligned with the definition of that phenomenon. First, in my understanding, value-added services refer to any non-core services. In this case, it goes beyond the basic features you would expect from a bank or an insurance company to be offered by them. Funny enough, they originate from the telecommunication industry, where operators would, for example, add supplementary services to their standard offer. And if you look at the cases, Vodafone Egypt, for instance, offered an end-of-call notification VAS, which means that at the end of each call, a customer would be notified about the exact call cost and the remaining balance if they are using a top-up service, for example. In Poland, for example, there’s Orange VOD, which is a movie rental service.

Market Value of VAS

If you look at the value-added services market capitalization, currently, it’s valued at almost 400 billion a year and is expected to almost double, exceeding 600 billion in 2030. So that’s in 6 years, which means it’s definitely continuing to gain ground. And if you look specifically at value-added services in banking, that’s the core focus of this conversation in this podcast. It’s all about extending beyond traditional financial products to offer additional functionalities that would, one way or another, cater to customers’ needs. It’s important specifically as digital channels have been growing recently.

If you look at mobile banking, for example, it’s becoming fundamental mostly due to the widespread use of mobile devices as the main access point to the Internet for the majority of global users, not only in Europe but that’s the same across LATAM, North America, Asia, Africa, you name it. With this in mind, and being aware of that fact, banks started the race on how many new additional features they could add to their banking mobile service that would extend their offering and, at the end of the day, help them generate extra profit. So it is the growth of mobile channels that is fuelling the growth of value-added services in the banking space since they are mainly a part of the mobile application of the bank on the mobile banking side for sure.

Five Core Values of VAS for Banks

But why would banks bother in the first place? That smoothly takes us to the five core values that value-added services bring to the table. So, let’s start with the most obvious one, which is that they generate additional revenue streams. So, VASes can open new opportunities to make money through fees, commissions, and premiums associated with premium services and add-on features. But there’s more to that. VASes bring competitive differentiation. They allow banks to set themselves against competition, attract new customers, and bring attention to people.

Value-added services enable banks to differentiate themselves against competitors and attract new customers, specifically, those seeking additional benefits beyond traditional banking services, because there is a group, let’s say, a chunk of customers who are more receptive to that kind of service. And here it’s a bang for the buck if you can offer them these extra premium services. The third group of values VASes bring to the table are open cross-selling opportunities. It is a great way for banks to cross-sell and upsell other products and services, such as investment products, wealth management products, insurance, loans, and the list goes on and on.

Last but not least, there are aspects related to increased customer loyalty because as a bank providing valuable services beyond just basic offerings that foster stronger relationships with customers, it leads to increased loyalty and retention, and that translates into, let’s say, a more valuable brand reputation. I mean, providing reliable value-added services enhances the bank’s brand reputation.

Benefits of VAS for Customers

So these are the benefits for the banking side. Still, VASes bring a lot of benefits to the customer side as well because they not only strengthen customer engagement, increase loyalty, and make more money, but from the user’s perspective, they improve the overall banking experience because you get access to perks and discounts with fewer apps to install and use. You’ve got just one account to rule them all. It’s sort of like the Super app style thing, which continues to gain ground in many different markets. So, this is a trend that banks can capitalize on, and it’s something customers are looking forward to.

Current Types of Value-Added Services

That leads us to a quick review of the status of the current value-added services. State of the art, let’s put it that way. And again, we can consider value-added services to be usually one of these five groups. It’s either commercial, mobility, public services, entertainment, or additional services. By commercial value-added services, I mean access to shopping platforms, discount codes, promotions, special offers, any premiums, and everything that goes into that. Mobility, taking you from one place to another and paying for it, means parking, public transportation tickets, highway access payments, car registration, car insurance, flight tickets, accommodation bookings, and all that sort of good stuff.

Then, public services include company registration, healthcare payments, social benefits, tax form submissions, and any other public, let’s say, governance, government applications or submissions, and tax reports. The list here is long as well. Then, moving forward to entertainment with cinema tickets, event access, subscription purchases, and management of, I don’t know, video-on-demand access, books, and e-book purchases. You can put a lot of examples in here. Then, when it comes to additional features or services, usually related to credit scoring, password management, cyber security support, insurance, storage spaces, having a concierge on demand, house billing payments, buy now, pay later payments. Again, a lot of value-added services fit here.

Examples of VAS in the Market

If you would like to look at the market holistically, some societies are more receptive to leveraging VASes, and that’s definitely the Nordics, Poland, Benelux, and Spain. These are, let’s say, the advanced markets racing to integrate value-added services. Preparing for that episode, I even came across one bank in the Netherlands that had as many as 52 value-added services built in, with some being as out-of-the-box as, for example, an implemented in-mobile banking app, a live score system for football, connected to betting providers, external third parties.

So, within your mobile banking app, you can check how your team played last weekend and then book games in advance. I mean, would you do that? I’m not sure if I would. I’m not, let’s say, a betting fan myself, a sports fan, yes. So potentially, that could be an interesting service, and I guess that on the bank side, there are questions like that being asked. I mean, would our customers do that? And there’s actually a quick way of checking that.

Key Criteria for Implementing VAS

So, a value-added service implementation is good if it ticks three boxes: trust, convenience, and usability. Or even more, expanding on that customer centricity, the bank needs and supplier relations all need to fit in well together because you have to either build it or implement an out-of-the-box solution that will play well with what the customers need and what the bank needs. And if that is all in place, then you’re on the safe side to go on and implement them. So, how would you implement them, you may ask?

Process of Implementing VAS

The insights on the implementation process of value-added services can follow a structured approach similar to launching any new product. So you start with collecting ideas and can gather them from various sources, including within the bank, like your customer service team, your innovation department, or externally outside the bank with customer feedback, market research, fintech accelerators, and any startups you work with. Then, you need to sort out these ideas, evaluate them, and check if, for example, similar solutions do exist on the market. Is there a comparable offering already out there that you don’t have to build? You don’t have to reinvent the wheel, for example, and you can choose the idea that is unique, has the most impact, or will bring the most value to you or your customers. Then, it would be best to move to a strategy and a plan.

So a strategy is something more high-level, outlining the vision, the target market, user demographics, positioning in your service offering, key features, and key benefits that this project needs to bring to the table, and then a detailed action plan which is more granular on what exactly you will do, what are the specific tasks and timelines and goals to deliver on that functionality.

Prototyping and MVP Development

Then, naturally, take it step by step with prototyping or with an MVP approach, mock-ups to visualize functionality, the user interface for quick feedback and iteration loops that will prepare you for full-scale development, which is not usually a super long thing, and it usually follows the standard software development life cycle with testing, implementation, and feedback. And naturally, last but not least, you would like to ask your customers whether they actually want this improvement, whether you would like to monitor the data, whether you are actually using it, what’s the feedback, and how you can continuously refine and enhance that value-added service offering to meet user needs and preferences better?

All right, we’ve gone quickly through what VAS are, what values VASes bring, the typical value-added service types of products, how to implement them, and how to check if that idea for a VAS is valid. Let’s take a quick look into the future, and we will wrap it up.

The Future of VAS in Banking

Looking ahead, one of the most promising but challenging trends for banks that are rather generalists is personalization, which customers increasingly demand in all industries. But the banking service specifically is, I would say, not really the best space to be personalized. Even though banks sit on a lot of data, like tonnes of data that they aggregated on many customers for the last years, it’s really hard to get from there to derive meaningful insights from that data to personalize that offer.

Banks are still using the same solutions for every customer. So, taking it from being general to being personal, I think that will be a big challenge for the banks, and that’s where value-added services can be very much of a differentiator. So, financial organizations will have to anticipate and deliver this personal value that can be individually adjusted by their clients. That will be the first trend in my understanding.

The second trend is that looking ahead, the VAS offerings will be expected to cover more lifestyle and wellness services, even blurring the boundaries between banking and other sectors even more. Thirdly, I expect that the global trend of super apps will boost and enhance the implementation of value-added services. So, if you look at markets like Nigeria, Brazil, or Vietnam, these are the markets where societies are used to having one app to do everything in it, banking included. Value-added services in the European or American version are halfway there when it comes to being as complex. This trend of super apps will impact other non-super app markets to the extent that it will put more and more pressure on implementing value-added services.

Conclusion and Wrap-Up

All right, guys. Wrapping it up, I think that as consumers, we increasingly seek convenience and seamlessness in digital transactions. Banks that embrace value-added services strategically will stay ahead and grow their profits even more because it is by offering innovative services, you can go beyond ordinary banking features and financial products that will drive loyalty that engage while at the same time positioning banks as strategic partners in operations that are not only banking related.

Final Thoughts

In my understanding, and I’m pretty confident here, value-added services are not just a trend; they are here to stay; they are the future of banking. We at Speednet believe that every bank and money-related business should leverage the power of VAS and deliver a lasting sense of being taken care of on all possible levels within their customers to foster engagement and long-term partnership.

If you found that episode useful or the topic of value-added services interesting, please take a look at our whitepaper on VASes. It has more case studies, numbers, tables, reports, and resources. I hope that you will find it very interesting.

Thank you and see you in the next episode.

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