Embedded finance essentially allows companies in any sector to provide financial services and create a much more flexible and personalized experience for their customers.
The era of embedded finance began a few years ago. During this time, they experienced significant growth and spread their own. There is no doubt that quarantine gave a strong impetus to this trend. The long period of lockdown showed that the banking sector survived thanks to technological solutions. In addition, according to some data, more than 70% of those who interacted with a bank or insurance company in a digital format were satisfied with the service.
A turning point
In 2019, the European Directive on payment services came into force, which completely changed the world of finance. From that moment, Open Banking was launched, that is, cooperation between technology companies and banks, which are now called upon to share customer data through APIs, subject to their consent with third parties.
The purpose of all this is to provide the best services in the field of electronic payments, and this can only be achieved by allowing new competitors to enter the market. Because, on the one hand, thanks to cooperation with fintech companies, banks will be able to implement the Banking as a Service (BaaS) model, through which, regardless of physical location, they will be able to increase opportunities for expanding their customer base.
On the other hand, companies in every sector will also be able to introduce financial services through fintech in order to retain their customers and attract new ones, including credit solutions, insurance, and investments. In practice, we are moving towards a scenario where fintech will offer customized turnkey solutions that include infrastructure, skills, risk management, etc.
One of the ways to apply Open Banking in your company is Finicity integration. Thanks to this, you will get access to user’s financial data, be able to conduct financial analytics, and most importantly, you will be able to ensure a high level of security for your customer’s data. Routine financial operations can be automated and made simpler with Finicity integration. You could automate budget management and optimization, automatic matching and categorization of transactions, and other financial transactions.
Benefits of Embedded Finance
From the user’s point of view, embedded finance has the clear advantage of expanding the offering and striving for more accessible, simple, and personalized services. Even from the point of view of a company that decides to offer financial services, there are several advantages, including:
- new revenue channels generated by the offer of integrated financial services;
- customer loyalty through a more engaging experience; getting more customer experience data to serve them better and better;
- last but not least, satisfied customers are more likely to spend money, thereby increasing revenue.
With access to vast amounts of user data, e-commerce giants can create unique financial products that can be easily made available to customers.
Consider an example of such technologies and their impact on our lives. Stripe is an American company that allows companies and individuals to send and receive payments over the Internet, launched Stripe Treasury. Stripe Treasury is a banking as a service API that allows you to embed financial services into your marketplace or platform. In other words, Stripe customers will be able to provide financial services to their customers.
Therefore, open banking and integration with various financial instruments will be a great opportunity to improve the level of user experience, provide more convenient payment methods for your customers, and further increase your income. A progressive idea, open banking challenges preconceived notions about banking services.
By giving users and businesses simple access to financial data and services via third-party apps and platforms, it expands their options. Open banking encourages creativity, rivalry, and a better consumer experience. Users can get individualized financial advice from it, manage all of their accounts and transactions in one location, and businesses can provide more cutting-edge goods and services.
Users will have more control over their finances and more opportunities to achieve their financial goals as a result of the new era of collaboration that open banking is ushering in between banks, fintech start-ups, and other financial industry participants.