Why Embedded Finance Has Come of Age

Embedded finance makes life easier for customers and generates a revenue opportunity for digital platforms, FIS Banking, Payments and Fintech SVP Taira Hall writes in the new PYMNTS eBook, “What’s Your Plan? Payments Strategies for a Strong 2022 Finish.”

At a time of great change that’s been hastened by COVID-19, businesses are looking for new revenue opportunities and meaningful ways to engage their customers. Many are rapidly accelerating digital engagement and seeking paths to embrace native financial solutions. Why?  

Companies embed financial experiences into their propositions to increase customer convenience and reduce friction. In doing so, they strengthen their overall customer relevance, create deeper relationships and generate new revenue streams by weaving their services into the very fabric of the customer’s day.  

Take Banking to Your Customers

In the age of the multi-faceted, cross-channel customer journey, embedded finance delivers financial service experiences at the point of need. For example, when a customer is searching for a property to rent on a digital platform, embedded finance enables the platform to offer “booking amount” financing directly in the digital platform itself or insurance to cover their stay. This makes life easier for the customer and generates a revenue opportunity for the digital platform. 

Embedded finance is not new, but some high-profile successes, including Uber, Lyft and platforms like Avail are driving uptake. Modern technology allows regulated financial services to be included — almost invisibly — in nearly any digital customer experience. But embedded finance is about more than how people shop; it is also about how companies move money.  

In the Digital Age One Size Fits Nobody

According to Invoca, 81% of customer journeys begin online. The search starts on a digital channel, even when the purchase is a house or automobile. By partnering with a real estate agent or an automobile dealership, financial institutions can position their financial propositions alongside products early in the customer journey. With the customer’s permission, it also empowers a company to become data-driven. 

Embedded finance experiences are created when the platform or retailer involved is a trusted source for the customer, with unique data and insight into their customer base. Data can drive a personalized financial experience enriched by the context in which it is provided. 

Although data rights are paramount, we increasingly find that customers are willing to share their data in exchange for bespoke services and relevant offers from those trusted sources. Newer technologies, such as artificial intelligence and advanced analytics, can facilitate “mass customisation” of financial products, for example, to align lending with customer credit scores and a bank’s risk profile. In this way, both the platform (or retailer) and the bank can acquire a new customer, but the real winner is the consumer who gets a better service and improved choice. 

Think Big, Start Small

We believe embedded finance is a huge opportunity for financial institutions and businesses to unleash their potential with a joint FinTech platform approach. All brands should consider leveraging embedded finance as part of their business strategy. With the right technical partner, they can think big and start small, but they can also rapidly engage in new ways.