Join us as we summarise the best points from our panel discussion on embedded finance.
Embedded finance is a hot topic within financial services, yet it is not yet part of mainstream conversation. At mmob, we wanted to host a panel discussion on embedded finance to kick off conversations about the sector we see as pivotal to improving financial services and benefiting users.
We joined forces with FinTech Alliance to bring the panel to life. With Olivia Minnock, Editor of FinTech Alliance, as chair (although COVID meant she appeared as a ‘floating head’ via zoom) we knew it would be an intriguing conversation. Here are some insights we just had to share with you.
An Introduction to our Speakers
Simon is the founder of Embedded Finance and SuperApp Strategies, advising businesses on how they can make the most of embedded finance. For him, embedded finance is important for how it allows any business, big or small, to use financial services and create new propositions to benefit users.
Andries is the founder and CEO of Upside, a cashback and reward solution provider that enables businesses to give their users the ‘upside’ of spending. Andries noticed that users often interact with a business and then have a separate journey to complete the transaction, and loves that embedded finance removes this friction.
Jasper is the CMO of PensionBee, an app that allows users to collate all their pensions and retirement savings into one place. While pensions may not be the most used or crucial financial product, they are still important and embedded finance gives users confidence that is often absent when dealing with finance.
Irfan is the founder and CEO of mmob, a company that provides embedded finance through integrating the products of third-party providers into the applications of digital brands. For Irfan, embedded finance solves issues faced by both large financial institutions and consumer-facing digital brands through collaboration and partnership.
Five Key Takeaways
What we know about embedded finance is just the beginning
So far, payments have dominated embedded finance, shown through the common examples of Uber integrating digital payments into their ride-hailing app and the buy now pay later (BNPL) giants such as Klarna and Afterpay. Imagine your pension app offering you a life insurance plan tailored to you – we all need pensions and life insurance, and yet this opportunity has not been explored (yet).
It might be time to re-bundle financial services
Simon gave a great analogy of financial services being like Lego. With the advent of fintech came the ‘unbundling’ of banks into Lego blocks, and the financial services that we currently have make up around 15% of the possible. With those foundation Lego blocks, there is a massive opportunity for innovation, using the partnerships and ‘bundling’ facilitated by embedded finance as a start.
Use of data and regulations are the biggest challenges to embedded finance
Regulations like GDPR can be difficult for financial services companies to navigate at the best of times. This becomes even trickier when sharing data between parties and embedding new products into an offering. While Irfan didn’t give away all his secrets, he made it clear that once regulations are understood and adhered to, there is no limit to what embedded finance can do. This is even more hopeful considering recent developments in regulations, such as the FCA’s removal of the 90-day re-authentication rule and restructuring of the Appointed Representatives regime to reduce existing difficulties.
The buy vs. build debate is so 2019; it’s time to partner and embed
To add a new component to an offering, it used to be a conflict between building it independently or buying it, both of which take vast resources and inevitably places the business in direct competition with those that have previously created the service. Why compete when you can collaborate? Partnering to embed financial services allows businesses to eliminate unnecessary competition and foster better relationships.
When partnering with a new business, our panel suggested imagining they are entering your house. Consideration should be given to the hygiene factors, the brand equity and alignment of objectives.
The future of embedded finance is personalisation, intelligence and inevitability
While our panellists had different ideas on the future of embedded finance, they can be summarised as:
Personalisation – Individuals will have unique, personalised experiences with financial services as data is shared and businesses learn how to create curated journeys. Journeys will become increasingly seamless for individuals, taking minutes rather than days to be approved for financial services.
Intelligence – There has been a natural progression from infrastructure towards embedded finance, and now the next step is intelligence. This will impact the initial user journey, using intelligence to create the personalisation mentioned above, but also what happens next; how will businesses use the increased amount of data from embedded finance to innovate and create new propositions?
Inevitability – With so much opportunity available under the embedded finance umbrella, it is inevitable that more businesses will follow the early adopters. As users experience the seamless journey of embedded finance, it will become crucial for businesses to follow suit to maintain a competitive edge, with every B2C needing an embedded finance strategy.
Embedded finance depends on relevant partnerships in a wider network. This is where the sector will thrive and fulfil its predicted potential. After all, embedded finance will be a $7 trillion industry in the next ten years – who doesn’t want a piece of that?
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