Embedded finance is a trend that is increasing in popularity as the banking landscape becomes more diverse and convenient. This trend in banking is becoming an integral part of many non-traditional financial services. It will continue to become a prominent trend in the coming years.
Fintech institutions can incorporate embedded finance technology into their existing platforms to enable consumers to make purchases directly through the platform to enhance their shopping experience. Yet, embedded finance does more than improve the shopping experience of consumers. It brings financial institutions, technology companies, consumer businesses, and services industries together to collaborate and provide financial services to consumers.
Embedded finance transforms how financial institutions, businesses, and consumers make financial decisions. This trend is redefining the boundaries of finance and fintech innovation. Here are a few ways fintech institutions can take advantage of this evolving trend.
Employment Data and Payroll Solutions
Over the last few years, the growing gig economy has been changing the way people work and how they get paid. The gig economy gives individuals new income opportunities while they continue to work their traditional job. However, they also tend to work multiple side gigs. These individuals receive a pay stub for their traditional job, but they do not receive a pay stub for their gig jobs. The lack of a pay stub can pose a problem for banks and lenders when they need to verify a customer’s income and creditworthiness.
Fintech institutions can use embedded finance to help companies that offer gig work opportunities to provide employment and income data to financial institutions. This information can help banks and lenders provide their services to gig workers and other independent contractors who need loans, insurance, and other financial services.
Niche Banking Communities
Online banking has been a feature of the financial services industry for many years. People are no longer limited to doing their banking at a physical location during specific hours. Embedded finance enables users to do their banking, make payments, purchase insurance, and make investments as a part of their regular everyday activities.
Fintech institutions can use the flexibility that embedded finance provides to cater to the banking needs of specific demographic groups. These demographic groups can include a variety of businesses and industries where fintech institutions can deliver the services they need to retain customers and attract new customers.
Transitioning from Debit to Credit
Making payments was the initial and main purpose of embedded finance. Then, fintech institutions started issuing branded debit payment cards while challenging the traditional banking industry and what they were offering. The focus was on branded debit cards because they are easier to issue.
Now, fintech institutions can produce credit cards or partner with a company that can make these cards for them via Credit Card as a Service offerings.
Reviving SMEs
Small businesses have unique and complex banking needs. Yet, large banks typically do not have the flexibility to meet their needs. Fintech institutions are in a great position to work with SMB banking and finance companies to provide products and services to small businesses. Embedded finance creates opportunities that include accounting and bookkeeping platforms, merchant cash advances and loans, e-commerce, and more. SMBs can merge banking and accounting activities to help businesses forecast revenues, get loans, issue debit or credit cards, and accept all payment types.
2022 will be a good year for fintech institutions that take advantage of the latest advancements in embedded finance technology. Employment data and payroll solutions, niche banking communities, transitioning from debit to credit cards, and reviving SMBs are just a few ways fintech institutions can benefit from these embedded finance developments.
How Can EMBank Help?
Fintech institutions can also benefit from working with a fintech-friendly challenger banking partner like EMBank. EMBank can enable fintech institutions to enhance their financial operations to provide more services to their customers. EMIs, PIs, and PSPs who work with a financial institution like EMBank can make this process easier to move forward.
Established in Lithuania and licensed by the European Central Bank, EMBank provides a Banking as a Service offering, combined with Safeguarding Account, Business Account, and Accumulative Account types as well as payment options through SEPA, Swift, and Target2.
Please keep in mind that the above information has been prepared or assembled by the EMBank and is intended for informational purposes only. Some of the information may be dated and may not reflect the most current legal developments.
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