By Anand Chandra, EU/APAC Growth Manager, Accolite Digital
With the onset of the digital age, the evolution of integrated finance has gradually transformed what we as consumers now think of as banking, seamlessly supported by Tech-for-Tech and Tech-for- Business. The advent of e-banking has pushed traditional banks to extend services to their wallet through digital channels. Emerging technology heralded the era of digital banking, shaping interconnectivity and data exchange between financial services and consumers. Reducing friction to ensure consumers switch between digital channels has evolved significantly over the past three decades. Each decade symbolized a change, gradually leading to a bond based on trust between the developer community and the consumer.
In efforts to expand consumer reach, the competitive outlook between traditional banking and neo-banking has begun to translate into a synergistic approach. In a decade, this breakthrough is now benefiting consumers in the form of integrated finance, a transformation of banking into banking as a service, delivered through omnichannel convergence and adaptive, responsive integrated customer journeys. context.
What drives the adaptive context-aware consumer landscape?
The main building blocks of the consumer exchange ecosystem include basic banking, treasury, funding, loan accounting, wealth management and advisory, cards, and insurance. Market participants have now started to interact with the end customer beyond producer and consumer channels.
The three mediums of consumer & producer intersections are:
- Digital Neo Banks via enhanced digital channel interface
- Hyperconnected FinTechs via Marketplace API
- Traditional banks are integrating their services through the developer community
Contemporary consumers today transact through premium APIs, encompassing deposits and transactions, loans, digital payments, wallet and trading, eOnboarding and custody, generating the most trending use cases consumer-centric in integrated finance. Not only consumer retention, but an expansion of their share of wallet, leads to the development of monetization avenues and platforms to be leveraged to develop a modern value chain around mobile payments, virtual cards, augmented reality, voice-enabled services and crowdfunding, among others.
Amplify the consumer banking experience as a service
When the consumer’s context-aware building blocks merge seamlessly, it restructures the value chain and presents new offerings to consumers. Much of integrated finance is driven by existing data within the digital ecosystem, which learns from integration with external systems and data from service partners. This data hosts a high degree of derived intelligence across multiple dimensions: consumer insights, regulatory limit systems, distributed models, probabilistic and deterministic sentiment analysis, consumer consumption behavior and purchase preferences, and cross-connection and sharing. information with partners. These data packets not only know each other, but also know how they will transact and trade within the consumer ecosystem. This enhanced intelligence introduces more context, making services more personalized and relevant to consumers. Data-derived context awareness is both proactive and adaptive, resulting in an amplification of the customer experience through expanded Banking-as-a-service.
Hosted under the Embedded Finance umbrella, consumers demand the most: Embedded Wealth, Embedded Insurance and Embedded Credit
Similar to how integrated finance allows consumers to access payment, loan and insurance products from non-traditional providers, integrated wealth allows companies to integrate wealth management and investment services to their consumers. More recently, Klarna has grown into a $45 billion business — $20 billion more than Deutsche Bank — by enabling brands to offer innovative point-of-sale credit solutions, such as paying in instalments.
Integrated insurance bundles coverage within an ecosystem of products, a service, or an integrated point-of-sale platform, either as an add-on to an underlying service or as a inclusion instead of stand-alone services for consumers. Built-in contractor insurance for a driver joining an on-demand economy service is very popular in this category. According to InsTech London’s report, the in-vehicle insurance market is expected to grow to $722 billion in gross written premiums (GWP) by 2030, more than six times its current size.
Embedded Credit, seamless Lending-as-a-Feature integration, instead of redirecting customers to a third-party site, offers credit to their customers at the time of application. National Australia Bank’s (NAB) simple home loan process has dramatically reduced “response time” for all of its customers. More than 30% of customers receive unconditional approval in less than an hour and 60% in less than a day. NAB’s goal is to make this the norm and further alter the digital exchange, especially post-pandemic.
Broaden the canvas of consumer exchange
Embedded Finance will continue to pivot customer centricity around three drivers (i) greater customer lifetime value – integrating structured financial derivative products into elevated customer journeys, increasing customer value and lifetime value, while reducing churn (ii) lower cost of acquisition – with a growing addressable market combined with contextual offers, companies will reduce customer acquisition costs, thereby increasing profits and (iii) higher interconnection rich with consumers through emerging technologies – cloud-based hybrid platforms for premium API management and integration with third-party partners and service providers.
FinTechs are betting on the expansion of embedded finance, compounded by trendy emerging tech themes such as digital twins, blockchain, AR/VR, 6G networks, IoT, and more. transformation canvas.