Engage the future
Embedded finance is transforming financial services, breaking down traditional barriers and unleashing a wave of innovation across the digital economy
EMBEDDED FINANCE AND THE FUTURE OF BANKING
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How can you engage in the future of finance today?
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Why embedded finance is a game changer
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Benefits of the embedded finance model
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Examples of embedded finance practices
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What is embedded finance and finance as a service?
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Introduction: Embracing an open future
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The future of finance is arriving faster than any of us imagined. Until recently, financial institutions enjoyed a monopoly on banking services. Today, a new era of technical innovation is democratizing financial services and creating opportunities for business far beyond the marbled halls of traditional banks. The ability to offer loans, issue credit cards or receive deposits was limited to licensed financial institutions. Regulatory, licensing and capital requirements meant significant barriers to entry. Banks offered banking services, full stop. Today, that’s all changing. Embedded finance is creating exciting opportunities for retailers, insurers, technology platforms and companies in more industries every day. Advancements in technology are unleashing innovation that’s disrupting long-held monopolies for financial institutions. For non-banks, embedded finance means the ability to leverage their brand to offer a wider range of services to their customers. Finance as a service (FaaS) is making bank systems accessible through APIs. In doing so, fintechs, banks, credit unions and large non-bank businesses can begin crafting their own experiences.
This e-book offers an overview of embedded finance in simple, jargon-free language to help decision-makers understand what embedded finance is and why it’s important for your businesses – no matter what business you’re in.
Embedded finance is traditional banking services offered directly by entities other than banks, when and where consumers want them most. Finance as a service (FaaS) is the end-to-end provision of licensed, regulated banking services through application programming interfaces (APIs). Embedded finance allows retailers, airlines, insurance, non-financial technology companies and more to provide financial services through their own applications and websites. Breaking down the barriers between financial and non-financial companies, embedded finance opens doors for innovation by making financial services available in contexts that matters most to consumers. Embedded finance is enabling non-financial businesses to boost revenues by delivering lucrative value-added services to their customers. Reshaping the competitive landscape, embedded finance is opening new distribution channels for traditional financial institutions.
What is embedded finance and FaaS?
The as-a-service model is redefining distribution models in industries from software to analytics, and now to finance, insuring and payments. The ability to provide services long restricted to traditional financial institutions, the as-a-service model allows businesses to expand into services that, until recently, posed prohibitive barriers to entry. Made possible by popular digital development tools like application programming interfaces (APIs), embedded finance is shaping up to be an anchor business model for the 21st century and beyond.
By 2030 embedded finance will represent a USD $7 trillion market opportunity
Embedded finance allows every type of business to deliver financial services
From ride-hailing services to quick-serve restaurants, big tech platforms to retailers and traditional financial institutions themselves, embedded finance is emerging as a defining model for the future of financial service delivery.
Embedded payments – Payments were among the first embedded finance services to gain widespread popularity. Today, consumers’ ability to pay for their coffee, taxis, lunch and more feels routine. That they’re able to do so seamlessly – almost effortlessly – without calling up a separate payment app is a tribute to embedded finance. Embedded finance – Until recently, if a consumer wanted to store money, they needed to go a bank. Embedded finance services disrupt that monopoly and offer consumers choice. By partnering with traditional banks, virtually any type of company can offer deposit accounts. From Walmart to Uber, Google to Amazon, embedded finance means banking isn’t just for banks anymore. Embedded financial services – Consumers are embracing financial services offered by the businesses they trust. Payment and deposit accounts invite even more value-added services like insurance, credit cards, financial advising and buy now, pay later (BNPL). Telcos, e-commerce platforms and automotive companies are just a few of the industries that are leveraging their brand equity and customer loyalty to offer financial services.
– JPMorgan Chase CEO, Jamie Dimon
"Fintech's ability to merge social media, use data smartly and integrate with other platforms rapidly (often without the disadvantages of being an actual bank) will help these companies win significant market share"
use a fintech banking platform
More than 24% of consumers
Embedded finance delivers a wealth of benefits to consumers, traditional financial institutions and an increasingly broad range of businesses. Embedded finance offers consumers greater choice and better experiences. Embedded finance greatly expands financial services options for consumers, making banking easier and more convenient than ever. Embedded finance allows consumers to follow their own individual journeys without leaving traditional banks behind. Embedded finance helps financial institutions prepare for the future. Traditional monopoly models of banking service delivery are rapidly becoming obsolete. Financial institutions need to embrace digital transformation, expand distribution channels and develop new value-added services. Embedded finance helps banks reach more customers with lower costs of acquisition, creating unprecedented opportunities of scale. Embedded finance helps non-financial brands grow revenue. Embedded finance helps non-banks expand into naturally adjacent financial services. While not seeking to become banks, businesses seek to leverage their ability to deliver high-value financial services at a fraction of the costs of incumbent financial institutions.
9 in 10 GenZ consumers would consider a bank account from a non-bank
Software companies can increase revenues 2-5X per customer
Embedded finance models are inherently disruptive and super-charging competition. The great convergence made possible by digital transformation has profound implications for all types of businesses. Barriers to entry are falling rapidly. Embedded finance and finance-as-a-service help businesses respond to the rise of e-commerce, the value of customer data and increasing willingness among consumers to share that data. Embedded finance and finance-as-a-service models are nothing less than the future of finance. FaaS is rooted in a relentless focus on customer experience – an area where many traditional financial institutions often compete from behind. Embedded finance helps businesses deliver exactly what consumers want: personalized, holistic experiences that are fast, safe and convenient. Led by the EU’s open banking initiatives such as PSD2, regulators around the world are moving toward open models that invite competition and innovation. Embedded finance offers traditional financial institutions a bridge to this more open future.
Why embedded finance is a game-changer
Finance-as-a-service is an agile, scalable and logical cross-sell strategy for navigating the competitive landscape of a digital-first global economy.
Embedded finance delivers on consumer demands for seamless integrated experiences
ENTER THE FUTURE OF FINANCE
Let's chat about the possibilities for your organization to tap into the enormous market opportunities embedded finance offers. Navigating convergence is like re-engineering a plane in mid-flight, a journey that demands trusted partners to design and implement the infrastructure of tomorrow. FIS® works with financial institutions, e-commerce platforms, data providers, insurers, wealth managers, healthcare providers and retailers around the world to build bridges to the future faster. Reach out to one of our FIS open finance experts today to find out how FIS is advancing the way the world pays, banks, and invests.
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Engage in the future of finance today
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