Deutsche Bank Says Embedded Finance Is Changing Business Models

Deutsche Bank Global Head of Embedded Finance Solutions Matthaeus Sielecki told PYMNTS that embedded finance is transforming verticals as far-flung as retail and logistics.

Payments are now being actively merged into business models as those models evolve — and the role of chief financial officers (CFOs) and treasurers are evolving, too, as transactions become a strategic focus, and point of innovation.

“It’s all about how you can enhance customer retention and the customer experience by offering banking like services,” said Sielecki, “at the point where that customer needs to decide to purchase a product or pay for a service.”

The conversation was part of the PYMNTS “Shaking It Up” series, which is focused on the areas where business model innovation is making an impact across industries and markets, and in the executive suite, as well.

Moving to Platform Models

At a high level, the ongoing digital transformation, driven by changing client demand and accelerated by the pandemic, has gone beyond payments as an instrument. Sielecki recounted that many firms are moving to direct-to-consumer (D2C) sales models, reaching their end markets through digital channels.

“And they’re also changing their models to open platforms,” he told PYMNTS, “as they become marketplaces,” which in turn shifts the ways in which they deliver value and generate revenue.

Banks (including Deutsche Bank) are of course helping integrate payments into those platforms and online interactions, where enablement happens through application programming interfaces (APIs). For the banks’ client firms and providers, for treasurers and CFOs, he said, “banking services are available at the tips of their fingers,” and within the back office. Banks, especially, he said, now have a seat at the proverbial table, he said, discussing new product design and innovation, in ways that are strategic but keep risk and compliance top of mind.

No matter the vertical and no matter the payments functions being embedded into their business models, Sielecki stressed the importance of partnering with banks and providers that have robust and resilient compliance and risk management systems. Deutsche Bank, for its own part, has transformed its own systems into an API accessible orchestration layer that turns products into services that can be aggregated and modularized.

“If you do this right,” he said, “our experience with clients is that you become a lot more effective, and the timelines for the implementation of these projects are a lot shorter.”

Where Innovation’s Changing the Game

Asked by PYMNTS where we’re seeing some of the most seismic shifts, Sielecki noted that B2B payments are being transformed and modernized, as small business owners demand an eCommerce-like experience as they browse for and select the goods and services they need.

“The expectations” of small business owners, he said, “are pretty much the same as in their private lives — and they expect a streamlined user experience.” Among those expectations: That a commercial transaction has an installment offering, a payment option that’s proven to be wildly popular with consumers.

Behind the scenes, he said, the digitization of manual processes is helping improve everything from generating invoices to paying trading partners. We’re moving, too, toward a B2B future where companies with recurring commercial clients can retain them with financing offers that they might not be able to get anywhere else.

“By doing all this,” he told PYMNTS of embedded finance, “you become a lot more strategically integrated with your clients and the partners you work with.”