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Embedded Finance Basics for Boosting Revenue

finance basics graphic with a woman on their laptop

Convenience.

Consumers love it.

Whether it’s food, transportation, or yes – banking – the average American consumer expects everything to be easy and hassle-free.

A recent Mastercard survey of North American consumers confirms that convenience is king.

Nearly two-thirds of American consumers said they either have connected or would connect their bank account information to a financial app to make getting or using services easier.

Embedded finance is all about connecting financial services with customers wherever they are.

If you’re a community bank, fintech, or core banking provider, this demand for convenience is a giant, blaring signal that you have some important business decisions ahead.

What is embedded finance?

When we talk about embedded finance, we’re talking about the intersection of a few components of digital transformation. It’s the place where fintech solutions and non-financial products and services work together to offer businesses and consumers a way to embed financial management into their everyday life – without disrupting it.

Embedded finance relies on open banking, APIs, and Banking-as-a-Service functionality to bring banking to the customer, usually for the purpose of offering payment or credit.

How about some examples?

Small- to -medium-sized businesses work with financial partners not only to grow and support their own businesses, but also to offer their customers specialized financing and payment options.

What does embedded finance look like in real life? There are a number of unique applications. Here are just a handful of possibilities:

  • A local restaurant applies for a loan to buy a food truck using a community bank’s online application.
  • A local startup uses a community bank’s invoicing and payment tools to save themselves time and money.
  • A local furniture shop uses their community bank’s point-of-service lending or Buy-Now-Pay-Later services to offer shoppers more ways to finance large purchases.
  • Another local business may benefit from offering their customers one-click payment options within a branded app – made possible by their community bank.

So, how is embedded finance different from Open Banking or APIs?

When APIs connect and share data between community banks and fintechs through core providers’ Open Banking platform, these entities can provide embedded finance tools for SMBs. Embedded finance is the end result of open banking and APIs.

What does this mean for me?

First, let’s consider your commercial customer. An SMB owner is looking to access capital through loans so they can grow and manage their business. A banking partner who uses embedded finance solutions to share banking data makes it easier for SMBs to apply for, get approved, and access funds – and creates a loyal customer. Embedded finance tools can also help these same SMBs save time (and money) on manual tasks, like payroll, bill pay, deposits, invoicing, and so on.

If you’re a community financial institution, you want that SMB’s business. The way to compete is to offer these digital banking solutions that help the SMB’s in your market – whether they need financial tools to grow and manage their business, or they want to give their customers a better experience and faster service.

What are the benefits of embedded finance?

The biggest benefit is the opportunity to widen existing revenue streams. That’s the big one. Embedded finance offers the ability to reinvent services, launch new products and solutions, and deliver convenience to your customers. All those things drive loyalty, and as an added bonus, you’ll have a healthy amount of data to improve your understanding of customer habits and needs.

So... what's next?

Embedded finance is more than a trend. It’s a way for community FIs and fintechs to offer their commercial customers digital tools to help them run their businesses. It’s also a way to give consumers the convenience that they demand.

Now is the perfect time to start activating this game-changing tool for your organization. Wondering where to start? Find a partner who specializes in fintech APIs and core banking platforms to help you take digital tools to the next level.

If you’re a community FI, you’ve probably embraced digital lending and are thinking about what embedded finance could mean for your business.

Would it be better for you to brand your own solution, or to leverage other digital platforms in new ways to reach your customers? There are benefits – and opportunities to capture new revenue – with both. We can help you sort out the best solution for your business.We’re here to help. Reach out to the Core10 team today.

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