In recent years, technology solutions and innovative digital platforms have disrupted the financial industry at an aggressive pace. Traditional banks are no longer the only players in the game, and they’re facing severe competition from startups and digital-first organizations that aim to provide scalable and customer-friendly financial solutions.
Unpacking Embedded Finance with Industry Experts
Embedded finance is a topic that has taken the industry by storm. In a recent webinar hosted by Finextra, Ruchi Bhardwaj, Principal Product Manager for Business Network Financial Services at OpenText, defined embedded finance as the integration of financial products and services into non-financial workflows. Enabling customers to have greater access to financial services at a lower cost, embedded finance also provides banks and businesses with new opportunities to explore additional revenue streams.
Embedded finance has the potential to become a game-changer for banks that aim to establish a competitive advantage in the digital era of banking. In the referenced webinar, experts from Mastercard, J.P. Morgan Chase, UBS, and OpenText discussed how embedded finance could be a marketplace differentiator for banks, enabling them to access new customer segments and improve customer retention.
Key Discussion Points from the Webinar
1. Embedded finance is on the rise, and banks need to adapt
The speakers agreed that the rise of embedded finance is a transformative trend that banks need to take seriously. Customers, clients, and key stakeholders rely on digital platforms to power their daily activities, such as invoice financing, payment processing, and reconciliation of receivables. When done correctly, embedded finance allows banks to provide services where the clients run their business processes, thus providing a personalized and convenient experience. No navigating between portals, no additional workflows, just one seamless experience.
It is clear that an embedded ecosystem brings numerous benefits. However, the road to achieving this experience is paved with several challenges. During the webinar, we asked the audience (n=652) where they struggled the most on their embedded journey. The chart below shows that the attendees’ number one barrier to achieving an embedded ecosystem was related to legacy systems and technology.
2. Embedded finance can be a source of revenue and customer loyalty
One of the main advantages of embedded finance for banks is the ability to tap into new customer segments and create new revenue streams. By integrating financial services into non-financial platforms, banks can serve customers where the customer runs their business process, attracting customers to a more seamless workflow that doesn’t disrupt their current processes. They can also explore revenue-generating opportunities with platform providers who need a banking partner to provide contextual knowledge around the complex banking landscape.
Embedded finance can also help banks build stronger customer relationships and increase loyalty. Banks can take advantage of these trends by providing more personalized and relevant services that meet customers’ specific needs. This can lead to higher customer satisfaction and retention rates.
3. Banks need to form strategic partnerships
Finally, the webinar emphasized the importance of strategic partnerships between banks and technology enablers. To succeed in the embedded finance space, banks need to collaborate with trusted partners who can match their strategy and vision. Banks must identify the right partners, build trust, and align on the areas where each organization can add value to the equation.
Embedded finance is taking shape in the industry, and everyone has their definition, goals, and roadmap. To gauge organizational readiness, we asked the audience where they were in their embedded finance journey. The results were surprising. As you can see in the chart below, the audience members were in varying stages of the journey. Some industry leaders were already deploying their solutions to customers while others were still in the research and learning phase. It is important to remember there is no one size fits all approach when it comes to embedded finance. Therefore, not all organizations are required to be on the same path.
What Should Banks do Next?
The speakers concluded that embedded finance is a marketplace differentiator for banks with the vision, agility, and capability to embrace this trend. When it comes to the next step, every bank is different. However, for those who have embedded finance on their roadmap, the foundational step for a strong future depends on the strength of the organization’s integration layer.
Ruchi Bhardwaj focused on four main points when it came to some of the things banks should pay attention to when drawing out their plans for embedded finance.
- Focus on the end user and aim to provide a solution that meets your customers where they are instead of asking the customer to come to yet another portal or application workflow.
- Look at embedded finance through the lens of total transparency, clarity, and transaction speed.
- Obsess over seamless customer integration for transaction banking and make this your organization’s competitive advantage.
- Evaluate the need for technology investment as the number of transactions and general payment volumes continues to increase.
Looking to learn more or interested in watching the webinar for yourself?
