Money 2.0 Conference - Frequently Asked Questions(FAQs)

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Embedded Finance: 6 Trends To Watch Out For!

Non-bank entities increasingly provide banking-like services such as bank accounts or wallets, payments, and lending. The entities adopt an embedded finance model to retain customers and increase their life span to maximize profits.

Experts at finance events have encouraged companies for years to consider embedding finance into their products and services to increase revenue, making every company a fintech company. Companies of all sizes and stages in life - from those who've been around for decades to those just starting - are thinking about how they can incorporate some sort of finance-related feature into their product or service to meet the needs of both businesses and consumers.

Financial institutions are now offering banking services as part of their strategy to meet the increasing demands of an increasingly digitalized world, according to the Money 2.0 Conference recent blog post.

BaaS is typically distributed to clients via APIs and requires substantial risk and compliance management from the embedded finance partner. Making it work will necessitate new technologies and capabilities. However, according to professionals from a finance conference, it is too early to predict how the market will develop.

Banking services as we know them and API banking might one day be just as ordinary as online or mobile banking. Financial institutions must develop a way to provide these services before other banks do so. Understanding and monitoring these trends can assist banks and those hoping to work with them on embedded finance in identifying opportunities and avoiding threats.

  • There is no doubt that customers want integrated experiences. According to our research, customers are flocking to these multi-product customer experiences known as ecosystems. Ecosystem orchestrators, by definition, seek to provide as much integration as possible, so an embedded integrated financial offering fits the model perfectly.
  • Large technology companies and nonbanking players can build and deliver financial services. Still, they cannot "become" banks in the United States or many other markets where the regulatory bar is high. Banking as a service is thus the only way for fintech to offer customers embedded finance - at least for the time being.
  • To meet new regulations and keep up with IT modernization, many banks are considering expanding or creating a new BaaS model to recoup costs and take advantage of technological advances.
  • Financial institutions seek new sources of income and product growth, given the decline in banking revenues and profitability. Models with scalable business practices and low-cost IT investments will provide a substantial advantage to financial institutions (e.g., distribution models).
  • Banks can scale BaaS faster with the acceleration of digitization, including automation and APIs, putting embedded finance within reach of more companies considering it. Simultaneously, firms seeking to embed financial services increasingly see their digital experiences as a collection of modules built by others. This is frequently due to their emphasis on software engineering as a core competency, viewing payments, lending, or deposit and checking accounts as another product capability to enhance the user experience.

Trust dynamics in financial services are evolving, according to a few finance leaders’ summit professionals. As banks in the US lose their competitive edge over Financial Technology (FinTech) companies, these other brands seem to be gaining more consumer trust. As a result, they can provide various products and services without being associated with large incumbent institutions.

Conclusion

Banks must quickly consider integrating new technologies such as BaaS into their current business practices. This will help them meet a heightened demand from customers who want an all-inclusive experience when interacting with their bank.

08/31/2022 - 10:15

Jhanvi Saxena

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Jhanvi Saxena
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Jhanvi Saxena
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Jhanvi has been with the Money 2.0 conference team for some time now, which is how she developed her great interest in all things finance related. A true enthusiast of cryptocurrency, cybersecurity, internet financial fraud detection, and scam investigation - Jhanvi aims to educate those around her on all aspects of managing their finances so they can deal with any form of misinformation or fraudulent investments.Jhanvi has been with the Money 2.0 conference team for some time now, which is how she developed her great interest in all things finance related. A true enthusiast of cryptocurrency, cybersecurity, internet financial fraud detection, and scam investigation - Jhanvi aims to educate those around her on all aspects of managing their finances so they can deal with any form of misinformation or fraudulent investments.