We partner with brands looking to build their strategy, platforms and propositions for the next decade to take advantage of the embedded finance opportunity.
Embedded finance is financial services on the customer’s terms, from anywhere and at any time. They no longer need to visit their bank to get access to their money. In some cases, embedded finance eliminates the traditional bank entirely. Some companies are stepping in to provide banking and financial services, even if financial services do not traditionally fall under their umbrella.
Increasingly, brands are embedding financial services into their propositions.
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Embedded finance is a massive opportunity similar in
scale to the entire US software and big tech market
scale to the entire US software and big tech market
The technologies, businesses and operating models that created the big tech wave are coming to finance.
The market opportunity for embedded finance is massive. As brands like Shopify (ecosystems) partner with providers like Affirm (embedded lending platform), entirely new value will be unlocked. This could be worth $3.6 trillion by 2030 – more than the value of the US big tech platforms today and roughly equal to the market cap of the top 30 banks globally.
*Based on current adoption trends continuing, and assuming that 40% of payments volume, 20% of lending volume and 20% of insurance volume moves to an embedded finance model by 2030.
The market opportunity for embedded finance is massive. As brands like Shopify (ecosystems) partner with providers like Affirm (embedded lending platform), entirely new value will be unlocked. This could be worth $3.6 trillion by 2030 – more than the value of the US big tech platforms today and roughly equal to the market cap of the top 30 banks globally.
*Based on current adoption trends continuing, and assuming that 40% of payments volume, 20% of lending volume and 20% of insurance volume moves to an embedded finance model by 2030.
Traditional non-finance brands (down-left), Digital non-finance brands (up-left), Digital finance brands (up-right) and Traditional finance brands (Down-right), all of them are joining this revolution with one goal in common: Improving Customer Experience (CX)
From Open Banking and Banking-as-a-Service to Embedded Finance
As an industry, we’ve invented an impressive repertoire of words to talk about what banks and non-bank platforms are doing with APIs. The final frontier is Embedded Banking (Banking Everywhere as Brett King defines in his book Banking 4.0).
On the surface, Banking-as-a-Service and Open Banking may sound similar, as both provide the user access to a financial institution’s platform. The difference is that while open banking provides third parties access to the data of existing bank customers, Banking-as-a-Service provides third parties access to bank functionality, so that non-bank companies can connect users outside of the bank’s existing footprint to banking services.
The simplest way to think about this broader definition of Open Banking is to divide it into two categories:
On the surface, Banking-as-a-Service and Open Banking may sound similar, as both provide the user access to a financial institution’s platform. The difference is that while open banking provides third parties access to the data of existing bank customers, Banking-as-a-Service provides third parties access to bank functionality, so that non-bank companies can connect users outside of the bank’s existing footprint to banking services.
The simplest way to think about this broader definition of Open Banking is to divide it into two categories:
- Access to data: Open banking initiative – UK / PSD2 – EU.
- Access to functionality: Banking-as-a-Service.
From Open Banking to Open Finance
Whereas Open Banking applies to payment accounts (such as current accounts), Open Finance could ultimately mean that savings banks and building societies, insurers, investment managers, consumer credit companies, business lenders and mortgage lenders would have to implement similar interfaces and procedures.
Open Finance has the potential to transform the way consumers and businesses use financial services. It could make it easier to compare price and product features and to switch product or provider. It could help widen access to advice and support in decision-making. It has the potential to spur innovation and development of new services, increase demand and improve efficiencies for businesses.
Open Finance would build on the Open Banking principles of allowing TPP access. TPPs would be able to access customer accounts in order to:
Open Finance has the potential to transform the way consumers and businesses use financial services. It could make it easier to compare price and product features and to switch product or provider. It could help widen access to advice and support in decision-making. It has the potential to spur innovation and development of new services, increase demand and improve efficiencies for businesses.
Open Finance would build on the Open Banking principles of allowing TPP access. TPPs would be able to access customer accounts in order to:
- Collect the customer’s financial data, to present it to the customer (‘read’ access); and
- Carry out or initiate transactions on the customer’s behalf, such as initiating payments, switching accounts, making an investment or applying for credit, including obtaining the necessary permissions to do so, and presenting data back to the customers (‘write’ access).
New Open Finance business
model applications
for Consumers and SMEs
(Small and Medium-sized Enterprises)
Consumers
| Customer experience | Banking-Financial-Insurance | Other |
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SMEs
| Marketing – Sales – Customer services | Finance, Administration, Legal/Compilance… | Operations – production – logistics |
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Go to Use cases
A new landscape for Embedded Financial Services and CX
Today’s consumers are hyper connected and hyper informed, and their expectations evolve faster than ever. This presents huge challenges for businesses of almost any industry, but also huge opportunities for those who:
At CX Lab we believe that “data + tokenization + open banking/finance” triangle will dramatically change the global financial services landscape and push CX to the next level.
- Developed a customer-centric strategy & culture.
- Adopt a collaborative approach by engaging third party technology & regulation enabling platforms.
- Make sure to build a motivated & inspired execution team.
At CX Lab we believe that “data + tokenization + open banking/finance” triangle will dramatically change the global financial services landscape and push CX to the next level.
Mastering these technologies will be essential to connect us to our customers, but an innovative CX obsessed strategy, will be what truly drives success.