Embedded Finance Brings Banking to Underserved Consumers No Matter Where They Are

For student-athletes, managing money is no layup. No easy line drive. Pick your sports metaphor.

Younger consumers who spend much of their lives on the field or traveling to sporting meets and away games could use a bit of help with day-to-day financial ebbs and flows, Roy Ng, CEO of Bond Financial Technologies, told Karen Webster.

Software has disrupted the way everyday life is conducted — and has paved the way for embedded finance to bring financial services to a growing number of new use cases.

As proof positive of how technology can foment better financial outcomes, Bond has enabled TeamUp, a money management platform to launch a card that helps college athletes manage their expenses and spending — and scholarship money — in ways that help them build credit.

“These are demographics that had not been focused on by banks or by other companies,” he said, “and now we are helping student athletes improve their financial health.”

Embedded finance involves offering everything from bank accounts to lending products across various digital channels — and getting non-banking companies into the mix.

And as to the mechanics of it all: according to Ng, “when you think about the concept of embedding finance,” he told Webster, “you embed it via software.” Many of our daily tasks are software-enabled, where developers can incorporate elements of financial products into workflows with which end users are infinitely familiar.

“This enables companies to meet the customer wherever they may be,” he noted, “and that’s all due to the power of software.” He said that software could help banks and non-banks work together and offer a seamless continuum of financial services — tying, for example, physical cards to digital activities.

Embedded credentials tied to traditional bank accounts become part of a software experience.

For the end user, the experience feels more akin to “working” with Apple than doing business with Bank of America.

A Need for the Bank ‘Underneath’ It All

To get there, said Ng, “all of these software companies need a bank underneath … the financial services and products they offer come through the bank and the backend.”

The rise of embedded finance has generated a tailwind for companies to think creatively about how to embed solutions into software — even with the current macro headwinds that are in place.

Ng noted that in the current environment, companies are taking less of a “growth” mindset toward embedded finance and are looking more at how it can be used to boost profitability. Against that backdrop, the connection between FinTechs and sponsor banks, in enabling banking as a service, becomes easier with platforms such as Bond’s.

A standardized infrastructure, he said, sidesteps the time and money that must be committed to building out products and services from scratch.

Bond, for its part, has logged the highest growth rates in its history in just the past few months.

Complete the Customer Experience

Companies are also finding reasons to embed finance beyond simply driving revenues and profits.

Embedded finance, he said, helps reduce customer churn and completes the customer lifecycle.

“It’s a defensive mechanism,” he said, “because if you have financial services, you’re always top-of-mind, and there’s a higher likelihood that consumers will continue to use your services.”

As time goes on, the opportunity is there for consumer-facing companies to bring financial offerings to communities that have been underbanked or unbanked. Bond, he said, has seen particular demand for its credit builder construct that helps FinTechs and brands offer their customers secured credit cards.

The offerings also help client firms generate credit interchange revenues.

Changing B2B, Too

Looking ahead, while the most immediate use cases that spring to mind may be B2C, embedded finance, said Ng, can digitize and streamline B2B. The majority of the tens of trillions of dollars worth of commercial payments are done by paper check, he said. Embedded finance (and especially virtual cards) he said, “creates a simpler way to track and analyze purchases — and get rid of the manual approach to accounting, while protecting against fraud.”

No conversation about finance and tech would be complete without at least some discussion of artificial intelligence. The long-term potential for embedded finance will be augmented by AI, he said, as account-level and transaction-level data flow through the ecosystem — and AI/bots can help recommend steps to end users that boost their financial health.

That’s something to embrace, he said, adding that “AI could be an interesting way to open up ideas and opportunities for people that, historically, might not have had this advice available to them.”