Embedded Finance Finds New Use Cases From Gig Economy to Nonprofits

As we head into the fourth quarter of arguably the most innovative year in payments since the pandemic, the liberation of capital is emerging as the story of the year.

Money movement is becoming intuitive and friction-free, a part of what happens in the background of all sorts of commerce.

Ingo Payments Chief Innovation Officer Joseph Akintolayo told PYMNTS in a “What’s Next in Payments” interview focusing on the topic of “embedded everything” that “putting money in the palm of your hand” — literally, with mobile devices or other technologies — can be a boon for consumers. It also opens new opportunities for businesses and anybody in the financial service value chain.

The driving force behind embedded finance is that from the consumer’s standpoint, “the person being served — that person wants whatever transaction they’re trying to conduct to happen as seamlessly with as few steps as possible,” he said.

The seamless interplay between consumers and businesses is being made ever more possible by payments that “are zipped” together by various companies and infrastructure players, he said. Banks and payment companies must pivot to support their customers and meet the expectations of those customers, especially with competition from FinTechs.

The expanded competitive landscape is healthy for consumers and fosters more opportunity for transaction volumes and more “wealth creation” for all stakeholders, he said.

Asked by PYMNTS where the low-hanging fruit lies for embedded finance, Akintolayo said there’s potential to embed fund flows in verticals such as travel, transportation, logistics and gig work, among several other verticals.

Tradespeople (such as plumbers) can be paid more easily on-site and at the very completion of the job, sidestepping the paper invoices and the weeks or even months it might take to get paid, or offer financing for larger projects.

With the rise of open banking, aggregators can get consumers’ (permissioned) financial information to another company that can make a credit decision in a split second. That decision can then be handed over to another entity providing debt financing. Ingo can push the money over to a card, bank account or digital wallet instantly, thus skipping checks.

Financial Wellness Gets a Boost

Beyond the confines of the transaction itself, embedded finance has the potential to improve financial wellness and inclusion, Akintolayo said. Churches, nonprofits and other non-traditional firms have a strong relationship with the end consumer.

“And they have a high amount of trust with the end consumer,” he said. “That’s enough to onboard them and bring them into the fold,” particularly with underbanked and under-served populations.

The banks themselves can partner with these trusted sources to bring financial services and various product offerings to these individuals and families that boost access to capital. Advanced technologies such as artificial intelligence and machine learning can use alternative data to risk score and underwrite populations that might have historically had limited access to credit, he said.

Ingo, for its part, has done much work to connect various ecosystems while supporting compliance, risk management, payments and ledgering, the things that make it all work, Akintolayo said.

“We have an advanced cloud-based ledger that lets everybody see what’s going on” with a transaction, he said. “The parties have full visibility. The sponsor banks, which are providing the infrastructure and the regulatory umbrella for us to do this, have every piece of information they need in real time when they need it” as money winds between end customers and banks.

In the end, with the rise of embedded finance, customer loyalty will improve.

“No one’s going to be mad at you for making their lives easier,” said Akintolayo, who added that “we’re in a society that appreciates convenience, and embedded finance delivers that.”