Industry: Financial Services

Embedded Finance: Enabling Seamless Financial Services

Written by on August 15, 2024. Posted in Blog. No Comments on Embedded Finance: Enabling Seamless Financial Services

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Embedded Finance: Enabling Seamless Financial Services

Unlocking new opportunities and enhancing the customer experience

Embedded finance has been changing the way financial services are delivered, integrating them directly into everyday consumer activities. Imagine securing a loan directly from your favorite online store, or getting trip insurance coverage while booking a vacation. Many of us have utilized embedded finance services without ever having had a name for it. As more businesses adopt these integrated solutions, the potential for improved customer satisfaction, loyalty, and retention is significant – not to mention new revenue streams. We’re looking at the benefits, challenges, and future opportunities of embedded finance, offering you insights into how to leverage this trend for an enhanced competitive edge and a way to provide exceptional value to your customers.

The Power and Potential of Embedded Finance

Embedded finance, referring to the integration of financial services into non-financial platforms, is enabling businesses to offer banking, lending, insurance, and payment services directly within their existing products, whether those are applications, websites or other platforms. The trend is gaining traction rapidly, in part due to its ability to create more cohesive, seamless user experiences and streamline financial transactions. The value of embedded finance in 2022 reached $66.8 billion, but estimates put that figure at $622.9 billion by 2032, highlighting how it’s poised to become a dominant force in the industry. This growth is driven by the increasing demand for convenience and the desire for businesses to differentiate themselves in a competitive market by integrating innovative financial solutions. Companies across various sectors, from travel to retail and everything in between, are recognizing the value of creating super-apps or platforms that incorporate a variety of types of services (including financial) to enhance customer loyalty and create new revenue streams.

Uber and Shopify are just two big-name examples of organizations already leveraging embedded finance to enhance their services. Uber, the ride-sharing titan, offers instant payments to drivers, while Shopfiy allows for merchant cash advances and payment processing right in its proprietary platform. Likewise, retail giant Amazon offers its customers buy now, pay later (payment in installments) services right at checkout, and Tesla offers its car buyers insurance options, streamlining the process of getting coverage for their new vehicles. So why is embedded finance so popular?

Unpacking the Benefits of Embedded Finance

There’s a ton of benefits that embedded finance can offer to enhance your business operations and the experiences of your customers. Let’s take a closer look.

1. Flexibility	Adaptive Solutions: Embedded finance providers highly flexible financial solutions tailored to meet the specific needs of your customers. For example, you can offer customized lending products based on individual customer profiles, which can be seamlessly integrated into the purchases process. Adaptability like this ensures that financial services are more accessible and highly relevant to each individual customer, enhancing their overall experience. Real-Time Access: A standout feature is the provision of real-time access to financial services. Your customers can instantly access loans, make payments, or secure necessary insurance without the delays associated with more traditional banking processes. This immediacy improves customer satisfaction while also increasing the likelihood of customers completing transactions and reducing cart abandonment.
2. Competitive Edge	Market Differentiation: In a crowded space, embedded finance is proving to be a key differentiator. Offering integrated financial services allows you to stand out from the competition, and provides you an edge over those who don’t. Increased Revenue Streams: Open up new avenues for revenue generation with the integration of financial services like payment processing, lending, and insurance.
3. Enhanced Customer Experience	Seamless Integration: Simplify the user journey by integrating financial services into everyday customer interactions. Without having to leave an app or website to complete a financial transaction, your customers will enjoy smoother, more convenient experiences. Personalization: Embedded finance allows for a higher degree of personalization, with financial services tailored based on customer data and behavior – and ensuring more relevant and appealing offers (i.e. a fitness app could offer personalized health insurance plans based on user activity levels).

Embedded finance is fundamentally changing the way businesses interact with their customers, offering unparalleled flexibility, competitive advantages, and enhanced user experiences. By embracing this trend, companies can not only meet the evolving needs of their customers but also unlock new growth opportunities.

Implementing Embedded Finance Offerings: A Step-by-Step Guide

So you’re ready to dive into the world of embedded finance and reap its numerous benefits… now what? Here are some tips to help you navigate the implementation process, from assessing business needs to choosing the right technology partner and executing a seamless integration.

Step 1: Assess Your Business Needs	Market Research: Conduct thorough market research to understand what exactly your customers need and what the market demands. Do your customers need more flexible payment options? Faster access to loans or insurance? Identifying precise needs will help you tailor your embedded finance offerings more effectively. Internal Assessment: Take a close look at the existing capabilities you have within your business. What financial services do you already offer and what are the gaps? Conducting an internal analysis will help you determine what additional resources or technologies you need in order to successfully implement your embedded finance offering. Make sure you’re aware of strengths and weaknesses to create a more robust integration plan. Define Objectives: Clearly outline what you aim to achieve with your embedded finance implementation, such as increased sales or improved customer retention.
Step 2: Choose the Right Technology Partner(s)	Determine Criteria for Selection: Selecting the right technology partner to set you on your embedded finance path is critical. Consider factors like: Scalability: Ensure the decisioning platform you choose can grow with your business and handle increasing volumes or added complexity. Security: Choose a partner with strong security measures and robust data privacy to protect customer data and financial transactions. Integration Capabilities: The technology should easily integrate with your existing systems and platforms. Case Studies: Look at previous examples of successful embedded finance partnerships – can your chosen tech partner offer the same seamless integration and robust experience for your customers?
Step 3: Implement Your Embedded Finance Plan	Develop a Roadmap: Create a detailed roadmap outlining each phase of the implementation process, including timelines, key milestones, and resources required. Build a Pilot Program: Start with a pilot program to test the integration on a smaller scale and gather feedback. Full Integration: Roll out the solution across your entire platform, ensuring all systems are integrated and functioning smoothly. Monitor and Optimize: Continuously monitor the performance of your embedded finance offerings and make necessary adjustments to optimize the experience.

Tackling Embedded Finance Hurdles

Yes, the benefits of embedded finance are substantial. But that doesn’t mean it doesn’t come with its own set of challenges. Here are some common hurdles and the strategies to overcome them.

Regulatory Compliance: Navigating the complex landscape of financial regulations is most definitely daunting. Different countries and regions have varying rules and regulations governing financial services, all of which can impact how you implement and maintain embedded finance. Ensuring compliance is essential to avoiding legal issues and potential fines.
- Stay Informed: Keep up-to-date with the latest financial regulations in the regions you operate in and be sure to engage with legal experts to understand all of the implications for your business.
- Develop Compliance Programs: Implement comprehensive compliance programs to ensure all of your financial activities adequately meet regulatory requirements, and conduct regulator reviews and audits to maintain compliance.
- Partner With Experts: Collaborate with financial services providers who have a strong understanding of the regulatory landscape in your region so you can navigate complex regulations more effectively.
Technological Integration: Integrating financial services into your existing systems can be technically challenging, requiring robust IT infrastructure, seamless data flows, and compatibility with your current platforms. And ensuring data security during integration is critical for protecting sensitive customer information.
- Ensure Robust Infrastructure: Invest in a robust IT infrastructure that can handle the integration of financial services. This includes everything from scalable servers and secure data storage to reliable network systems.
- Utilize API Integration: Use APIs (Application Programming Interfaces) for seamless integrations. APIs can facilitate data exchanges between your systems and financial services providers, ensuring smooth operations for your customers.
- Implement Proper Security Measures: Utilize advanced security measures, including encryption, two-factor authentication, and regular security audits to adequately protect customer data both during and after the integration process.
Customer Trust: Building and maintaining the trust and loyalty of your customers is critical when you’re offering financial services of any kind. Customers need to feel confident that their data (including identity, account numbers, and transactional data) is secure and that services provided are reliable. Any incidents that breach this trust can have severe repercussions for your brand (and your bottom line).
- Be Transparent: Be upfront and straightforward with your customers about how their data is used and the measures you have in place to protect it.
- Provide Customer Support: Ensure you have robust customer support in place to address any concerns or issues your customers may have regarding your embedded services.
- Perform Quality Assurance: Regularly test and update your financial services to ensure they remain reliable and secure. High-quality service delivery enhances customer trust and satisfaction.

Implementing embedded finance can transform your business, but it’s crucial to address any potential challenges head-on – and preferably before they pop up! Stay informed, invest in the right tech, and build trust with your customers so you can navigate these obstacles with ease and ensure a successful embedded finance integration.

The Future of Embedded Finance: What Lies Ahead?

As embedded finance offerings (and the tech behind them) continues to grow, the impact on various industries are becoming more profound – with trends surrounding embedded finance shifting, use cases evolving, and long-term benefits emerging.

Increased Use of AI: AI can enhance financial services by providing more personalized and efficient solutions, with everything from AI-driven chatbots offering instant customer support and machine learning algorithms that can analyze user to data to offer customized financial products. This level of personalization and rapid response improves customer satisfaction and engagement.
Expansion Into New Sectors: Embedded finance has been well-established in sectors like retail and transportation, but that’s only the beginning. Industries including healthcare, education, and real estate are exploring the potential of embedded finance solutions. Healthcare providers could offer financing options for medical treatments directly within their platforms, or educational institutions could integrate payment plans for tuition.
Smart Contracts: Self-executing contracts with the terms directly written into the code could make embedded finance even more accessible – automating transactions and reducing the need for intermediaries, making processes faster and more cost-effective. In real estate for example, smart contracts could help automate property sales, ensuring that all conditions are met before the transaction is completed – increasing efficiency and improving fraud screening.
Decentralized Finance (DeFI): By leveraging blockchain technology, DeFi enables financial transactions without traditional intermediaries like banks, leading to more decentralized and democratized financial services. This could enable peer-to-peer lending platforms to become more prevalent, allowing individuals to lend and borrow directly from each other, with embedded finance seamlessly facilitating these transactions.
Sustainable Growth: Organizations that adopt embedded finance can look forward to sustainable business growth. By integrating financial services, you can create new revenue streams and enhance loyalty of your customers. And offering financing options at the point of sale increases conversion rates and average transaction values, leading to higher revenues overall.
Enhanced Customer Loyalty: The convenience and personalization offered by embedded finance can significantly enhance customer loyalty. Access to tailored financial solutions, easily and securely, means your customers are more likely to return and recommend your services to others, resulting in a strong customer base and competitive advantage in the market.
Operational Efficiency: Automating various financial processes allows you to streamline operations, reducing the need for manual intervention, minimizing errors, and speeding up transaction times – leading to lower operational costs and greater efficiency. And reducing the time and resources spent on managing things that are now automated means more focus on core activities or strategic innovation.

Emerging trends and new innovations are set to further enhance the impact of embedded finance, making the future runway of opportunity long and bright. The benefits of embedded finance are clear (sustainable growth, improved customer loyalty, greater operational efficiency) – now all you need to do is ensure you have the right technology partners along for the ride.

Want details on how an all-in-one decisioning platform can enable your embedded finance offering?

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Roundtable: Navigating Regulatory Challenges and Affordability with Foresight in Financial Services

Written by on August 1, 2024. Posted in Webinars. No Comments on Roundtable: Navigating Regulatory Challenges and Affordability with Foresight in Financial Services

Provenir Financial Executive Club: Strategies for Excellence in Dynamic Decisioning

Roundtable: Navigating Regulatory Challenges and Affordability with Foresight in Financial Services

When: Thursday 10th October 11:30am – 2:30pm
Where: Hotels at SIX – Stockholm

In the current market in the Nordics, financial services providers are navigating through a period marked by a combination of high interest rates, increased regulatory pressure, and persistently high but potentially moderating inflation. But what does this mean for the year ahead, and how should lenders best position themselves to navigate this uncertainty?

Join us live on 10th October for this exclusive senior-level roundtable where will bring together industry experts to delve into the complex landscape of regulations and their impact on affordability.

Key highlights of the discussion include:

The crucial role of foresight strategies
Effective regulatory compliance and cost management
The critical integration of data and risk decisioning technology
Insights into future regulatory changes and how to adapt to evolving landscapes

Format:

11:30am – Arrival. Drinks to be served during networking
11:45am – Keynote from Chief Economist Lena Sellgren
12:30pm – Roundtable discussion
12:30pm – Three-course lunch is served
2:30pm – Official close and summary

Register your interest here

Lena Sellgren

Lena is Chief Economist and Head of Analysis at Business Sweden, the Swedish Trade and Investment Council, with a background from Nordea, the Ministry of Finance and the National Institute of Economic Research. Lena has extensive experience in business intelligence and economic analysis. Prior to her role at Business Sweden, she was Chief Analyst at Nordea Markets. She has a solid experience of working in the public sector. She has been Head of Public Finance at the National Institute of Economic Research and worked for over ten years at the Ministry of Finance, including as Deputy Head of Tax Economic Analysis. In addition, she has been an expert in several public inquiries and for many years has been a Swedish delegate in working group meetings and bilateral negotiations within the EU and OECD. She has also been a board member of the Norwegian Research Council and an expert in the South Sweden Chamber of Commerce’s “Productivity Commission”. She is also a columnist for the German business newspaper “Handelsblatt”

The Provenir Thought Leadership Roundtable Series is designed to convene industry visionaries, C-level executives, and thought leaders in the financial sector for insightful discussions on redefining risk decisioning strategies. The series aims to cultivate a collaborative environment for sharing forward-thinking perspectives, exploring innovative approaches, and shaping the future of risk decisioning in an era of rapid technological evolution and changing consumer expectations.

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Tackling Tech Bloat: Slimming Down to Boost Efficiency, Security, and Innovation

Written by Brendan Deakin on July 10, 2024. Posted in Blog.

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Tackling Tech Bloat: Slimming Down to Boost Efficiency, Security, and Innovation

How Major Banks and Large Financial Services Providers can Streamline their Tech Systems

Today’s technology can be both a vital enabler to progress and growth, and also a potential hindrance to efficiency. With the accumulation of outdated, redundant, or overly complex tech systems, larger financial institutions, including major banks, are feeling the pressures of tech bloat. And just like any other bloating, tech bloat is uncomfortable – hampering efficiency, escalating costs, and stifling innovation – which makes it a critical issue to address. For larger banks in particular, the urgency to streamline tech infrastructure has never been greater. With an increasingly competitive (and much more highly regulated) environment for financial services providers, eliminating tech bloat is essential to enhancing your overall operational efficiency, improving your security, and enabling your ability to remain agile.

According to a 2023 survey by MuleSoft and Deloitte, large enterprises now use an average of more than a thousand applications across their organization.

So what exactly is tech bloat, and how can you slim down your stack? Read on to find out more.

The Silent Saboteur: Understanding Tech Bloat in Financial Services

Referring to the excessive accumulation of outdated, redundant, or highly complex tech systems that weigh down an organization, tech bloat in financial services is becoming increasingly common. This phenomenon stems from a variety of causes, but the biggest tends to be an abundance of legacy systems that have been patched and repurposed over the years. Of course many financial services providers require very specific needs to be addressed (including everything from core banking systems and risk assessment models, to cybersecurity software, workflow automation, customer relationship management, financial planning and forecasting, data sources, fraud and identity management, loan origination software, and payment processing). As the list of needs (and related tech) grows with your organization, so does the bloat.

But many of the software solutions you have will overlap in functionality, leading to inefficiencies in both operation and cost. A survey by Freshworks shared that “54% of IT professionals say their organization pays for software” that never gets used. And often these systems are not integrated with each other very well, creating numerous silos of information, complicating workflows, and making data access tricky. Not to mention the fact that extensive customizations and add-ons over the years, while useful at first, can quickly turn into burdens, limiting flexibility and making maintenance and updates difficult. And of course those updates are critical, because with constant regulatory shifts, financial institutions do regularly need to update their systems, which can result in a quickly tangled web of temporary fixes that, you guessed it, add more bloat (not to mention leave you more vulnerable to everything from data breaches to lapses in compliance).

Unveiling the Not-so-Hidden Consequences of Tech Bloat

Now that we’ve looked at what it is and how it starts… What impact does tech bloat really have on day-to-day operations? As it turns out, a lot – and those effects get compounded the longer your bloat hangs on.

Financial Implications: First and foremost, tech bloat significantly strains your financial resources. Maintaining and supporting any number of redundant systems is, well, redundant, leading to increasing operational and maintenance costs. And outdated systems tend to consume a disproportionate share of your budget, diverting necessary funds away from more strategic, growth-focused investments, and hampering your ability to invest in more innovative, efficient solutions.

According to Freshworks, “the cost of trying to use unhelpful technology amounts to more than $84B annually in wasted time in the US alone, or $10M every hour of every day.”

Operational Inefficiency: A bloated tech environment slows down business processes and complicates workflows, with legacy systems and overlapping solutions creating bottlenecks. This inefficiency affects day-to-day operations, but also has a compounding effect the longer it continues, leading to longer turnaround times and a lack of flexibility and agility in your operations, ultimately adding friction to customer experiences.
Risk and Compliance Challenges: The more outdated systems you have to manage, the more the risk of errors, data inconsistencies, and compliance misfires increases. All financial services providers must adhere to stringent regulatory requirements, and the more bloated your organization, the more challenging it is to ensure compliance, leading to potential fines and reputational damage.
Security Vulnerabilities: Along the lines of compliance struggles, outdated systems are often easier prey for cyber attackers. The complexity of a bloated tech environment makes it much more difficult to implement robust security measures effectively, leaving you open to targeting by cybercriminals. Any breach (data, compliance, ransomware) can have severe consequences, including financial losses and significant damage to customer trust.
Innovation Roadblocks: Want a surefire way to stifle innovation? Maintaining and integrating multiple tech systems makes it extremely challenging to adopt new technologies, even if those technologies are ones you really, really want to utilize. In an industry where agility, flexibility, and continuous innovation are required to stay competitive, this hindrance to tech advancement places larger, more complex financial services organizations at a distinct disadvantage – making it difficult to explore new opportunities and deliver cutting-edge solutions to your customers.

Any of these consequences should be enough to address your tech bloat problem, but put them all together and you can see it’s not just about security or reducing operational costs – it’s fundamental to unlocking your potential for sustained innovation and sustainable growth. Streamlining your tech infrastructure allows you to overcome these challenges and position yourself for future success and customer loyalty.

Case Study:
Reducing Tech Bloat

Consider the case of Provenir customer NewDay. Some of their existing systems were proving costly in terms of release times and updates, and were due for decommissioning. By implementing more holistic risk decisioning software, they were able to significantly reduce processing time and improve quote response times.

Sub-1
second decisioning processing time
99.95%
SLA for availability
80%
improvement in speed of change
2.5x
faster quote response

Winning the War on Tech Bloat: Strategies for Financial Institutions

So what can you do to streamline your operations and slim down for good? It sounds daunting, but what it really requires is a strategic, methodical approach (and the right technology partner).

1. Conduct a Technology Audit:	Identify Redundant and Outdated Systems: Thoroughly review all of your existing systems to pinpoint which ones are outdated, redundant, or no longer serve a critical function Assess Integration and Interoperability: Evaluate how well your current systems integrate and communicate with each other, identifying gaps and inefficiencies
2. Streamline and Consolidate:	Prioritize Critical Systems: Determine which systems are essential for your core operations and focus on maintaining and enhancing those first Phase Out or Replace Redundant Solutions: Gradually eliminate or replace systems that are no longer necessary or that duplicate functionality
3. Invest in Modern, Integrated Solutions:	Adopt Cloud-Based Platforms: Leverage cloud technology to improve scalability, flexibility, and cost-efficiency Emphasize Integrations and Scalability: Invest in solutions that can easily integrate with your existing systems and scale as you grow (or can scale as you continue to eliminate other existing systems)
4. Enhance Data Management and Governance:	Centralize Data Repositories: Consolidate your data into centralized repositories to ensure consistency, accessibility, and security Implement Robust Data Governance Frameworks: Establish strong data governance practices to manage your data quality, privacy, and compliance
5. Foster a Culture of Continuous Improvement:	Encourage Innovation and Flexibility: Promote a mindset that embraces new technologies and innovative solutions Regularly Review and Update Technology Strategy: Continuously assess and update your technology strategy to align with evolving business needs and tech advancements in the industry
6. Partner with the Right Tech Providers:	Collaborate with Established Decisioning Software Companies and Consultants: Engage with tech firms and consultants to leverage their expertise and innovative solutions (and be sure they have experience with legacy migrations, complex integrations, and reducing tech bloat) Leverage Industry Expertise to Guide Transformation: Utilize the knowledge and experience of industry experts to navigate the complexities of technology transformation (i.e. does your new tech provider have an experienced Professional Services team that can help guide you?)

Fighting off Future Bloat

Now that you’ve slimmed your stack, how can you ensure that your tech bloat doesn’t return with a vengeance? Adopt a forward-thinking, agile approach. Agile methodologies are crucial, as they promote flexibility in technology development and deployment, allowing you to adapt quickly to changing consumer/industry needs and emerging industry trends. Agile methods encourage iterative improvements, which can help ensure that all of your systems remain both current and effective. Which is also why it’s critical to stay aware (and ahead) of tech advances in the industry. Keeping up with cutting-edge solutions and tech advancements allows you to proactively enhance efficiency and the customer experience. Look towards building a sustainable technology roadmap; with long-term planning that focuses on scalability and adaptability, you’ll ensure that your tech infrastructure can grow and evolve with the organization. Prioritizing this flexibility and continuous improvement and innovation will help you safeguard against tech bloat and maintain a streamlined, efficient, customer-centric tech environment.

Provenir’s AI-Powered Decisioning Platform

Part of fighting the bloat battle is selecting the right technology partner – one that can enable flexibility, scalability, and an end-to-end decisioning platform that you can build and grow your business on. Provenir’s AI-Powered Decisioning Platform brings together the key capabilities you need to turn decisioning into a differentiator, allowing you to deploy accurate, fully automated risk decisioning across the lifecycle, while also gaining actionable insights to optimize strategies and enhance performance across the entire organization. Featuring solutions for data, decisioning, case management, and decision intelligence, across onboarding, fraud & identity management, customer management and collections, Provenir’s platform is a one-stop solution that eliminates silos, brings teams together, and enables sustainable, customer-centric growth.