The rise of embedded finance marks a new era, not only for banking transactions but also for the overall relationships between financial institutions, consumers and businesses.
Vasily Grigoriev is the vice president and managing director for global SaaS at BPC, the company looking to deliver innovative and best-in-class proven solutions which fit today’s consumer lifestyle when banking, as payments, become embedded in a wide value chain of transactions and commerce.
Grigoriev discusses the importance of embedded finance and how the banking industry can take advantage of the opportunities it presents. The BPC EVP covers what’s in it for consumers, how banks can use embedded finance, as well as what a future with embedded finance could look like.
Today’s consumers expect convenient digital services to be available everywhere, and financial services are no different. That’s why it’s no longer just banks and financial institutions offering the vital financial products and services we’ve all become so reliant on to live our day-to-day lives and run our businesses.
Embedded finance is here to stay and will only continue to grow. It delivers the seamless and straightforward experience that customers want, with technology making it easier than ever for companies to embed everything from virtual wallets to lending services in their offerings. Pretty much any company can now offer bank-like services to their customers through fintech systems.
The question for the banking industry is, how can traditional financial institutions adjust and take advantage of the challenges and opportunities embedded finance brings?
How consumers benefit from embedded finance
It’s clear that the convenience of being able to engage with multiple services, including financial, all in one
place is going to benefit consumers. Combining financial with nonfinancial experiences on a single digital
platform boosts accessibility and speeds up transactions.
The appeal is obvious, and one study found that 61.4 per cent of respondents would use financial services from an e-commerce provider. They know it’s something that will save time, a precious commodity in today’s busy world; add ease-of-use and accessibility and their loyalty to the providers offering these extra services will only increase.
How can banks capture the value?
A slight shift in perception is all that’s needed for banks to grasp their role in the future of embedded finance. There are multiple benefits to banks getting involved and providing their infrastructure and expertise to new players in the financial space.
Banks can drive growth and build their customer bases by supporting the companies embedding financial products and services into their platforms. And there’s even the opportunity to switch things around, with banks including products from new fintechs into their existing offerings.
And as well as gaining more customers and growing their business, valuable cost benefits for banks also exist. Many banks historically struggle with updating legacy systems to be able to offer the most up-to-date service, so partnering with technologically advanced companies to deliver financial products often eases the cost burden.
“The future of banking undoubtedly includes embedded finance, and financial institutions of all shapes and sizes can be a part of that future if they embrace the transformation”
What to look out for in the world of embedded finance
There are many significant embedded finance use cases driven by the digital transformation we’ve seen over the last few years. Think of Amazon’s working capital loans, Tesla offering car insurance, and Shopify’s business bank accounts. With embedded finance now being the heart of everything tech and payments, BPC’s collaboration with Singtel is another milestone where BPC provides a processing service model to power the Dash app’s end-to-end payment experience as they thrive to give access to transparent and convenient financial services embedded in a user’s everyday activities.
As embedded finance grows, we are seeing some interesting trends developing alongside it. Things like increased market space for new fintechs and diversified revenue models, technological advancements, more use of AI and machine learning, and consumers becoming more open to new players offering financial services. Where historically consumers trusted incumbent banks and were warier of new providers, they are becoming more confident in new finance models.
Open APIs and sandboxes are also making fintechs and financial institutions more vigilant in their offerings as they can reflect back on their technology with the help of a more controlled environment.
The challenge for those incumbents is to adapt and embrace embedded finance and the technology that underpins it. Instead of turning away from new opportunities, perhaps fearing the change, banks can and should be proactive – looking for ways to support and partner with the providers that have the customer base and tech expertise to deliver embedded finance to their best advantage.
The future of banking undoubtedly includes embedded finance, and financial institutions of all shapes and sizes can be a part of that future if they embrace the transformation.