There used to be a time when you started a financial services business or added a financial product to your existing line of business, one of the first things you needed to do was establish a relationship with a bank. Then, you had to integrate and build your offering on top of outdated infrastructure and legacy bank operations. This process could take years before your product was up and running for you and your customers. Thankfully, this is a thing of the past for today’s businesses, both startups and established enterprises.
Now, you don’t have to spend the time, money, or heartache setting up and integrating your systems with those of a traditional bank. This means businesses won’t have to deal with the years-long process of going through integrations with multiple vendors. This also means you will not have to stand up a compliance and risk management department within your organization or go through an arduous due diligence process with the bank’s compliance department.
While banks have lumbered along, trying to update and innovate, nimble fintechs have emerged to change everything about financial services as we’ve known them. This is known today as “embedded finance.”
What is Embedded Finance?
If you haven’t yet heard the term embedded finance, some refer to it as embedded banking or banking as a service. It might just be the most revolutionary change the world has seen in the financial industry for decades. Embedded finance refers to how any business, large or small, startup or well-established entity, can embed any financial services product into their business seamlessly, efficiently, anywhere and at any time.
It’s the integration of financial services into a non-financial business, regardless of what kind of business it is. Businesses such as startups, cable companies, telecommunications, supermarkets, and more can have multilevel benefits by offering financial services to customers. These benefits can include generating new lines of revenue for your business to deepen the relationship of your customers.
In addition to payments, businesses can offer customers many other services included in the embedded finance cache. These include FDIC-insured bank accounts, branded debit cards, prepaid cards and gift cards, cross-border transactions, and lending. That said, it’s easy to see how the banking industry is not just changing with the help of fintechs. It is transforming into a democratized version of what was once most accessible to the fortunate few.
Anyone Can Embed Financial Services
If you’re planning a startup, it means that you can launch your company much faster and cheaper than ever before. And there’s no complex or outdated infrastructure to deal with either. The financial solution provider you decide to partner with will manage everything for you. And when it comes to providers, you have a range of companies to choose that vary in many ways. How do you know which one is right for you?
Embedded Finance: Main Players
The most innovative embedded finance companies include Alviere, where I am Chief Compliance and Risk Officer, Bond, Unit, and Moov. All innovative, smart, and qualified choices. No matter what stage your company is at, you’re likely looking for a complete package, end-to-end embedded finance solution. When choosing a financial service, pick one that is easy to integrate, provides a compliant, reliable solution, and can interoperate with accounting systems.
Bank branches have been steadily declining at about 2% per year, for several years now. While banks are quickly becoming a thing of the past, embedded finance platforms are taking the reigns. Embedded finance frees businesses from all the complexities and timelines of traditional banking. Businesses no longer need to establish a relationship with a bank to offer their customers financial services. As more businesses realize the fintech service offerings, and their ease of access, they will continue to turn to their backs on traditional banking.