The fintech industry is progressing rapidly and creating a new space of opportunities. Behind the established business leaders is a brand new set of companies developing that work seamlessly with traditional and financial service providers to meet the demands of the modern digital customer.
Some refer to these businesses as disruptors, while others view them more appropriately as enablers – companies committed to improving the customer experience and delivering highly personalised service. There is a significant opportunity for fintech companies to focus on enhancing outdated processes and eliminate areas that limit the industry from providing a seamless and personalised service.
The partnerships between big banks and leading brands to embed financial services are a great example of how fintech is evolving to achieve these goals. Embedded finance integrates financial products digitally with non-financial-based companies, such as shops. Integrating embedded finance is increasingly common, but the challenge is managing significant volumes of data and delivering complex technical processes. Embedded finance provides a solution for companies that want to offer their customers personalised service to generate a product-focused growth strategy.
Since the pandemic, there has been a major shift in customer behaviours. People became increasingly digital as accessibility shifted to online providers. Embedded finance responded to this shift and is now part of the everyday customer journey for millions of people. While embedded finance is becoming more common, it remains a considerable challenge for traditional providers to integrate the right solutions due to several reasons:
Data – Embedded finance depends on lots of data to ensure it collects enough of an idea of the customer and the financial services provider – and matches one to the other. If a loan offer doesn’t apply to a customer, it results in frustration and a fragmented process for both sides. Fintech businesses have the tech and algorithm to support this matching process quickly and efficiently.
Legacy Systems – Many traditional finance businesses operate on legacy systems that manage large datasets. Migrating this information is complex and something that many are cautious to introduce. Applying a software-as-service (SaaS) solution with fintech is one way to navigate this challenge and provide a service that improves the overall offering.
New Competitors – We are experiencing a range of emerging non-financial services companies beginning to enter the embedded-finance market. Collaborating with fintech enables traditional businesses to maintain their competitive edge.
New Customer Market – Fintechs have been very successful at attracting a new group of young customers and a range of new financial products. Embedded finance is an ideal way for traditional banks to meet the needs of this new customer group, who are typically looking for a quick and simple solution rather than an established brand reputation.
Customer expectations – People have access to more information, and if they aren’t satisfied with a service, they will look elsewhere. With more digital access and comparison sites, traditional finance providers are more inclined to share customers with other market providers when they cannot offer a specific service or product. Ultimately, meeting customer needs is critical and offering a partner-led service only helps the customer, improves reputation and encourages return business.
Embedded finance is likely to become more innovative and commonplace within our financial lives. Progression is happening very fast, and more industries are recognising its potential. Data management and assessment processes are also improving and enabling fintech businesses to provide even more customised services. We have also witnessed a significant change in the attitudes of established banks toward fintech – and the other way too.
The concerns of losing customers to other providers are declining, and partnerships are becoming more critical. The historical element of hesitation toward fintech has been replaced with a desire to partner and utilise technology and data that create rich digital financial systems that enable them to provide a seamless service to their clients.
