Why banks should embrace embedded finance in 2024
Will 2024 be the year we see serious adoption of embedded finance by traditional banks? Many fintechs are recognising the benefits like scale and network effects, but what about the opportunities embedded finance brings to financial institutions?
From integrating seamlessly into customers' daily lives to opening new revenue streams, the potential for banks is immense. We'll explore the benefits of, and crucial steps towards, implementing embedded finance strategies - highlighting how technology providers can play a pivotal role.
Embedded finance and its benefits for banks
Understanding embedded finance
Embedded finance is at an interesting stage in the hype cycle right now – between a buzzword and finding its rightful place as a seismic shift in how financial services are delivered.
Imagine offering loans, payments or insurance directly within the apps and websites people use every day. That's embedded finance. It's about making financial transactions as straightforward as ordering a coffee on your phone. This approach benefits banks by placing their services right where the customers are, significantly enhancing user experience and engagement.
We know from consumer trends that today's users expect services to be available instantly and seamlessly as part of their regular online interactions. Banks that adapt to offer such integrations can stay significantly ahead in the competition.
The opportunity for banks
The reasons for banks to adopt embedded finance boil down to customer retention, revenue generation and staying relevant in a digital-first world. It’s a given that customers no longer see visiting a bank branch as a necessity, or even logging into a banking app. They want financial services to be available at the point of need, within the apps they already use and love. By embedding finance, banks can cater to this demand, ensuring they're not left behind as fintech and other non-traditional players innovate rapidly.
As well as reaching and retaining customers, financial institutions are beginning to understand that embedded finance can unlock new revenue streams beyond interest and fee income, such as partnership fees or revenue sharing models. This diversification is critical as traditional banking becomes more commoditised.
Where do technology providers come in?
Implementing embedded finance might sound daunting, but technology providers are changing the game. For example, mmob's low-code technology simplifies the process, enabling banks to integrate their services into partner platforms without a heavy IT lift. This means banks can launch new embedded services quickly and at scale, testing different approaches without extensive upfront investment.
Once a bank decides it wants to reap the revenue and engagement benefits of embedded finance, it can work with a provider like mmob to bypass the complexity of building and maintaining integrations, focusing instead on crafting the best possible services for its customers. Moreover, mmob’s platform provides insights that can help banks refine their offerings based on real user interactions, maximising impact and ROI.
Implementing embedded finance strategies in 2024
Embedding new products and services into your bank’s offerings isn't just beneficial; it's becoming essential. Starting this journey involves a few critical steps. First off, you must identify the services that align best with your customers’ needs and your business model. Whether it's lending, insurance, rewards or something else, picking the right service to embed can make all the difference. Next, assess your current technology infrastructure. It must support seamless integration with third-party services. If it doesn’t, it’s time for an upgrade.
Don't rush your selection process. Think about what your customers genuinely need and how an embedded service can meet that need efficiently. You should also think about a way to test certain products with your customers to see what might stick.
To achieve this, collaborating with the right technology partner is pivotal. An embedded finance enabler like mmob can bridge the gap between your existing infrastructure and your partner’s, and also enables you to quickly deploy a new solution to gain vital customer feedback. This step is crucial because the right partner can reduce integration time, enabling you to go to market faster.
Leveraging partnerships and technology
Cross-industry partnerships have never been more critical. By leveraging partnerships, banks can offer comprehensive and innovative financial solutions that go beyond traditional banking. For instance, a partnership with a retail platform could allow your customers to access financial products directly from the retail website, creating a smoother customer experience.
When choosing a technology partner, consider their track record, integration processes, and whether they can offer scalable solutions to meet growing demands.
Technology wise, working with an integration tool like mmob can make a significant difference in simplifying the process. This not only accelerates time-to-market but also opens up new revenue streams by enabling banks to deploy their products across a vast array of digital channels efficiently.
Expect substantial benefits from integrating embedded finance into your offerings. Customer satisfaction will likely skyrocket as you provide more seamless, personalised financial services directly within the digital platforms they already use. Enhanced customer experience means greater loyalty and potentially a larger share of wallet.
The potential for banks offering embedded finance
Additionally, banks can operate as the embedded service provider themselves, in order to reach new customers through different digital channels and tap into new revenue streams. By offering financial products in non-financial digital ecosystems, you grab the opportunity to engage with customers at different points in their journey, not just when they think about banking.
The key is to always keep an eye on evolving customer expectations to stay ahead in the embedded finance game.
In essence, the successful implementation embedded finance strategies lies in careful planning, selecting the right partnerships, and leveraging technology effectively. By doing so, banks not only stay relevant in the rapidly changing financial landscape but also unlock new opportunities for growth and customer engagement.
Curious about how technology like mmob's can simplify the integration of embedded finance for your bank? Want to explore how to streamline your route to market? Contact us here.
Frequently Asked Questions
Why is offering embedded services important for banks?
Embedded services can enable banks to offer new products to their customers in a more integrated, user-friendly manner, enhancing customer experience and unlocking new revenue streams.
How is embedded finance the future of the economy?
Embedded finance blurs the lines between financial services and other sectors, making financial tools more accessible and fostering innovative business models.
What is the wider potential of embedded finance?
Increasing financial inclusion
Enhancing user experience
Creating new business models
Enabling real-time financial decisions
Fostering innovation across sectors
How will fintech change the future of banking?
Fintech is set to make banking more accessible, personalised, and customer-centric, shifting the focus from transactions to tailor-made financial solutions.
If you’d like to learn how your financial institution can implement a successful embedded finance strategy, please get in touch with us at contact@mmob.com.
