Embedding Banking into Everything

 What will the future banks be like? Frankly speaking, we doubt there will be a physical bank where financial transactions may be carried out. This doesn’t mean that banking won't exist in the future. Banking systems have existed in some form or another for as long as humans have transacted, and they are likely to survive in some form or another for as long as we do business. However, banking as we know it today, may not be around for much longer. In the future, deeper integration of financial services, often known as embedded banking, is expected to become the standard.

 

Today’s banking is nothing like what our grandparents or parents experienced. Consider this: when was the last time you visited a real bank office to conduct business? Do you still use cash or your debit card, or do you prefer to utilize mobile applications, digital wallets, and UPIs? The introduction of new technology has ushered in a new era of digitally-driven experiences, and banking is no different.

Customers have expressed a desire for uberized financial services that provide more flexibility, ease of use, control, and personalization. Banks, too, have expedited their digital transformation journeys in the face of increased competition from fintechs and internet behemoths. And the COVID-19 epidemic has proven to be the most significant driver of banking digitization. Increased usage of online transaction methods was prompted by social distancing rules and fear of infection, and this trend is expected to continue post-pandemic.

 

In reality, the epidemic has hastened the use of technology in the banking and financial services industries, and has altered the laws of how companies interact with financial services. The contemporary client, and their expectations of smooth, intuitive service, are at the centre of this transition. Banks are currently experimenting with innovative, more customer-centric business models that necessitate tighter integration with non-financial companies in order to provide a broad and easily accessible variety of services.

 

For example, Tesla offers a simple and convenient insurance scheme that allows users to purchase insurance through Tesla virtually as soon as they purchase their vehicle. This is also less expensive than purchasing an insurance through a third-party provider. Lyft, a cab-hailing service, is now issuing debit cards to drivers, allowing them to collect money immediately. This programme also allows drivers to open savings accounts. This type of integrated finance model is designed with the customer in mind: acquire all of the services and products you need in one location, quickly and easily, for a smooth and optimal experience. It is predicted to increase at an exponential rate, with a market value of USD 138 billion estimated by 2026.

Embedded finance is clearly not a passing trend. It is here to stay because it provides a win-win situation for all parties: clients have simple access to what they need, and banks and third-party firms are more likely to conclude agreements by making the process painless. It's also a great way for banks to learn more about their customers' spending habits and needs so they can fine-tune their personalization initiatives. Banks and third-party providers can boost cross-selling and mutual growth by creating an integrated financial ecosystem. Embedded finance, such as point-of-sale financing or Buy Now Pay Later programmes, can enable banks reach clients who were previously unable to access traditional banking services.

Embedded finance has a variety of applications. Of course, one method to use it is through BNPL options. Banks might go even further by partnering with corporations that have larger credit systems to make loans for larger sums. Alternatively, companies might, like Tesla, integrate insurance services into their offers, making it simple and straightforward for customers to cover their new purchases. Embedded financial technologies might be utilized to connect users with their physical banks for investing and trading operations, allowing them to make suitable investments. Financial technology-as-a-service models, which handle everything from deal administration and client acquisition to invoicing and revenue management, are fast making their presence known in corporate portfolios as technology and customer requirements continue to grow.

Safe to say that Banking will not be the same in the future.. Banks will become orchestrators of ecosystems based on the requirements of their customers. Furthermore, banking will be tightly connected with a number of related and unrelated industries, providing customers with greater convenience and value than ever before. To do all of this, banks must act rapidly to take advantage of growing open banking prospects. And to do so, businesses must continue to accelerate their digital transformation efforts by making well-considered investments in the appropriate technology platforms and partners. The future bank will be digitized and integrated into every step of a customer's buying process.