Money Mobility and Embedded Payments Recast the Concept of Banking

Ingo Payments CEO Drew Edwards told PYMNTS’ Karen Webster that the very definition of what a bank is — what it does and what it can do — is changing.

Ask anyone working for a bank just what a bank does, and they’ll answer that the institution takes loans and makes deposits, Edwards said. And doing both, simultaneously, is what sets a bank apart from other financial services players.

For the consumers, “it’s the place where you safeguard your money and access that money that’s a utility to buy things,” Edwards said, speaking to PYMNTS for the series “What’s Next in Payments: What is a Bank? The Changing Landscape of Banking and Financial Services.

Trust is the glue that binds it all together. PYMNTS Intelligence and Ingo Payments’ data showed that more than half of consumers and small businesses bank at large national banks, and 25% opt for smaller banks and credit unions.

Funding Several Accounts

But Edwards added that in the current environment, consumers keep funds spread across several accounts and segment, or silo, those accounts for different use cases.

There’s a greater need to enable money mobility so that funds can flow easily in and out of those accounts as the holder desires.

Money mobility means that banking now can, conceivably, be extended to specific relationships through embedded banking, Edwards said. Embedded banking is moving beyond the confines of spending to full-blown digital banking, spanning peer-to-peer payments, check cashing and bill payments.

“The standard for utility in a deposit account is much more robust,” Edwards said.

The transaction part of banking — beyond lending — is where sender-centric ecosystems are flourishing as recipients find ease in managing their daily activities, he said.

Picture, then, the restaurant that, embracing embedded options, sidesteps the complexities of managing cash tips and instead creates a brand-new account for a worker, opened and enabled on the individual’s phone, complete with a card and digital wallet.

“The worker can then turn around and go transact,” Edwards said, or use that account to fund other accounts.

Money mobility as a concept is nothing new. Years ago, PayPal accounts were embedded into eBay’s platform, Edwards said. In some ways, embedded banking is simply the latest iteration of that model, solving money movement for senders and recipients in a way that’s friction-free and often cost-free.

There’s an opportunity to embed digital banking apps inside of ecosystems to chip away at banking relationships — or complement them — depending on the sender and receiver relationships, Edwards said. Everything needs to be digital, safe and flowing in both directions.

“If you wrap a market competitive digital experience — where consumers download apps and can do all the things that they want to do with an account — you’ve got a consumer at a ‘buying moment with intent’ that they did not even necessarily realize that they had,” Edwards said.

Platforms, Ingo among them, enable consumers to pay bills, share money with friends, move money between accounts and link issuer/processors to digital wallets — with know your customer and fraud defenses built in, he said.

“This utility is inherent to what banks have been doing for a long time,” and what many neobanks have struggled to do, Edwards said. “There’s a magical moment where you’ve embedded banking into an employer/employee relationship, for example, and solved several problems.”

In the meantime, customer acquisition costs are lessened, and recurring use cases are bolstered through the crystallization of “delightful customer experiences,” he said. Digital wallets make it easier to aggregate what would normally be far-flung bank accounts so that users can see their balances, choose cards and figure out how they want to move funds.

As Edwards told Webster: “There are new opportunities here for customer acquisition and for banking.”