EY estimates that the market size of global embedded finance will grow from $264billion in 2021 to $606billion as early as 2025. With the space set to dramatically disrupt the financial sector worldwide, The Fintech Times seeks to understand how.
As more firms recognise the potential of embedded finance across all industries and sectors, the space has become increasingly crowded and competitive. To understand the keys to staying ahead in embedded finance, BaaS and super apps, The Fintech Times reached out to more experts.
Prioritising “a frictionless, seamless user preference “
Steven Madow, vice president of product at paytech Stax, explains how ensuring the best possible customer experience should be the number one priority for all firms:
“Today, almost every software company is a payments company as well. It’s a core expectation for any platform to natively handle payments for both users and customers. Customers require easy payments in their product or service experience, which has made embedded finance an extremely competitive space. For instance, five years ago, it was unique to use payment tech from a smart device, but now it’s only a small sliver of the market that doesn’t know how to do that due to the convenience it provides to users.
“The key to staying ahead of the competition is for businesses to prioritise the customer experience. Consumers are increasingly gravitating toward agnostic wallets like Apple Pay and Google Pay because they demand convenience and ease of use. If a customer’s preferred payment method is easy to use upon first exposure and widely accepted everywhere, they will continue to use it. With embedded finance becoming crowded, businesses must prioritise a frictionless, seamless user preference to stay ahead.”
“Consumers don’t want to cobble together and educate themselves”
Cynthia Kleinbaum, chief customer officer at fintech app MoneyLion, also discussed the importance of user experience when differentiating a service:
“Consumers benefit by having greatly improved financial access, transparency, personalised recommendations, products, and services seamlessly integrated when and where they need them. Making sure you’re serving people with genuine utility is key.
“Robust integrations are a huge part of B2B in general, and the term embedded finance implies a focus on integration. Embedded finance and BaaS products and services must have extremely flexible integrations.
“All of these topics are reflective of the current generation of consumer trends that are being driven by technology. Consumers don’t want to cobble together and educate themselves with a bunch of bespoke solutions and software. It’s all based on digital experiences, on-demand experiences, and convenience.”
“Create a seamless experience that will retain consumer attention”
Igor Skachkov is the chief product officer at international merchant acquirer payabl. Skachkov also explains the importance of ensuring a great user experience:
“Financial services drive super app adoption as they allow non-financial players to provide a full experience for users, including insurance, bonuses and discounts, all in one app. Revolut has started adopting this model and Klarna has also entered this space.
“As businesses strive to remain competitive and retain customers, we’ll see more companies adopting this model. For example, an insurance app that only provides you with a choice of an insurance company will lose to an app that can also provide capabilities to make insurance contributions, get reimbursements and have some discounts, let’s say for car rental insurance.
“To be competitive, a brand needs to accommodate all the consumer needs related to the core product and create a seamless experience that will retain consumer attention, even if that’s for a slightly higher premium.”
Placing “users at the centre of product development”
Vivek Jetley, EVP and head of analytics at analytics and digital solutions company EXL Service, explained
“Staying ahead requires having a user interface which is easy to navigate and places users at the centre of product development.
“1. Personalisation, customisation and localisation: Fintech super apps should understand user needs and preferences. Investing in data analytics capabilities and leveraging data to deliver personalised customer journeys and tailored financial health recommendations can significantly enhance engagement, help build stronger loyalty, and differentiate platforms from competitors.
“2. Scalability and flexibility: Super apps should be able to handle increasing user traffic, seamlessly integrate new services, and adapt to changing market dynamics. Scalable architecture, efficient backend systems, and flexible modular designs can enable platforms to evolve and scale rapidly.
“3. Strong Partnerships, leveraging established brands and platforms: Super apps should actively seek strategic partnerships and collaborations with complementary startups and incumbents to expand their ecosystems so they can rapidly deploy newer financial products and services within the super-app and remove the need for customers to go elsewhere.
“4. Strong supporting features: There should be options for key in-app features like real-time notifications, guardrails spending guardrails and expense management tools, and financial simulation scenarios.
Considering recent developments within the banking industry and the increasing number of data and security breaches in general, customer trust is slowly eroding. Hence, while the above factors call out the dimensions on which a ‘super-app’ must be built, it is becoming increasingly imperative for enterprises to build their value proposition on a strong core foundation of customer trust.”
“Leveraging personal financial management tools”
Jennifer White, senior director for banking and payments intelligence at J.D. Power, offered her expertise:
“There is an intentional emotional need for many bank customers to feel they are actively managing their financial lives – or at a minimum are empowered to actively manage their lives should they decide to take the plunge. What is key to staying ahead is leveraging personal financial management tools that go beyond tracking current financial health status to offer prescriptive advice, incentives for positive moves, or gamification of goal setting among other features.
“The challenge for fintechs is that many large national banks are now offering these experiences combined with the option to return to a branch for a personalisation one-to-one review with bank personnel. The J.D. Power 2023 U.S. Retail Banking Satisfaction Study also tells us that only six per cent of all bank customers nationwide use branches only with 91 per cent mixing branch and digital experiences.
“Among those mixing experiences, 42 per cent are highly digitally engaged while another 87 per cent expect to use their branch at the same or increased level in the next 12 months. National bank super apps are well positioned to compete with popular fintech super apps while offering complementary in-person experiences – these reinforcing channels help nurture that emotive loyalty among their customer base.”
“Embedded finance players need to think outside of traditional modules”
Nelson Castellanos, chief partnerships officer at embedded insurance provider HDI Embedded, discussed the potential benefits of seeking “less obvious services” in the competitive space:
“Embedded finance and BaaS are the buzzwords of the moment but we’re only in the beginning stages of the journey. While there is a significant number of competitors in a crowded space, the market is still largely untapped, which means there are multiple opportunities beyond basic financial services.
“Embedded finance players need to think outside of traditional modules like payments, international transfers, and card issuing. They should consider incorporating essential modules such as risk management and embedded insurance if the goal is to stay ahead of the curve.
“The ability to leverage already existing but less obvious services effectively – in a competitive market – will give rise to more successful providers.”
