4 charts, Member Exclusive

4 charts on why banks need embedded finance to be relevant in the future

  • Banks have an opportunity to rethink their transformation strategies.
  • FIs can consider turning invisible by powering ecosystems instead of going direct to customers.
close

Email a Friend

4 charts on why banks need embedded finance to be relevant in the future

Gartner predicts that by 2030, 80 percent of incumbent financial services firms will go out of business through commoditization and ineffective competition.

The Age of Assistance, a term made popular by Google, is turning the financial services industry on its head. With ease of access and exposure to a large and diverse set of digital services, customers are no longer satisfied with just getting what they want. Today’s consumer demands flexibility in how and where they engage financial services to get what they want.

"Banks that take advantage of this shift will outpace their customers and seize a new generation of customers across a multitude of channels. Banks that fail to adapt, risk extinction," said David Donovan, executive vice president of financial services at Publicis Sapient, in a recent whitepaper.

Thinking outside the app

new dominant design

"Customers think about banking while they’re doing other things, like shopping, making travel plans, and talking to their friends,” said Citi’s head of technology for its consumer bank, Gavin Michael.

Banks shouldn't focus all their digital transformation efforts on making their brand visible and present everywhere. The true power of a digital transformation initiative is when banks understand the power of invisibility, suggests Donovan. By partnering, leveraging customer trust, and building an embedded ecosystem centered around the customer, banks can find a way to be more relevant for their customers.

SPONSORED

Donovan, whose financial services practice at Publicis Sapient develops technology for many of the world's top banks, encourages banks to think ‘outside the app’ and place their customers at the center of their strategy. This new digital embedded finance ecosystem provides opportunities for banks to integrate with other products and services to offer their customers.

Using Amazon as a model

amazon growth

Today’s banking customers expect similar experiences from their banks as they have from non-financial industries.

Amazon has, through its drive for customer obsession, become the platform of commerce by allowing third parties to participate in their ecosystem, from e-commerce services to cloud-based platforms.

Today more than 50% of Amazon's revenue comes from being a platform to sell services from third parties. Amazon has implemented a consumer-centric business model that provides the customers with an experience such that they get what they want (the product), but also how (ordering online) and where (to their own homes) they want it.

"The ease of experience and the customer focus has provided Amazon platform an incredible trust equation with their customers," said Donovan.

How banks are adapting to this shift

industries planning to enter financial services

Several banks are already in the process of taking advantage of the opportunities provided by embedded finance. Goldman Sachs is a leader, according to Donovan. They've built their new platform from the ground up around an ecosystem to plug and play the right partnership model, according to Donovan. Their acquisition strategy also seems to be around enhancing their platform capabilities and services.

PNC Bank’s cooperation with OnDeck’s ODX Platform Service is an example of two companies coming together for mutual benefit while making the loan application process seamless for customers. "Not only does this provide great value to the customers, but it also creates a competitive advantage for both of these companies," he said.

The partnership ecosystem

China's ecommerce platforms are examples of banking services putting on the invisibility cloak, according to Donovan. Banks can look to WeChat, with over 1 billion users, as an example of a company that has integrated messaging and finance. WeChat has optimized the user experience by combining online payments with communication. Customers use the communications platform for a diverse set of financial transactions.

"As companies in the financial sector are making these adaptations, the elevated customer experience is becoming the new norm," said Donovan. "Companies that can be on the cutting edge of this will have the opportunity to get a large amount of business from customers who demand this level of service and will not settle for less. Companies that do not adapt will lose out on those customers. Over time, the majority of consumers in the market will fit this description."

0 comments on “4 charts on why banks need embedded finance to be relevant in the future”

10-Q, Member Exclusive

Robinhood unveils a 5% APY for Gold members, but how will users respond?

  • Robinhood's recent move to challenge traditional banks includes its increased savings offering, a 5.0% APY for Robinhood Gold Members. 
  • The stock trading platform appears to be in a precarious balancing act, grappling with the escalation of deposit strategies while facing a decline in both transactions and monthly active users.
Sara Khairi | November 20, 2023
10-Q, Member Exclusive

Q1’24 affirms Affirm’s upswing in BNPL

  • Affirm's quarterly results indicate that back-to-back enterprise collaborations in conjunction with collective strategies are eventually winning out keeping the firm on course.
  • Going forward the BNPL provider intends to focus on continuing to invest in risk management, technology, and product development.
Sara Khairi | November 13, 2023
10-Q, Member Exclusive

Q3: The PayPal story isn’t over

  • PayPal saw improved earnings in the third quarter compared to the previous one.
  • Chriss answered some of the burning questions and gave a bit more color on what firm assets could require more work to turn around than he thought.
Sara Khairi | November 06, 2023
10-Q, Member Exclusive

Ted Pick is Morgan Stanley’s new leader. Where does it go from here? 

  • The question, 'Who will succeed James Gorman at Morgan Stanley?', that echoed in Wall Street's nooks and crannies has finally been answered.
  • The present and incoming CEOs might have different management styles. What they both share, however, is a shrinking economy and growing macroeconomic pressures at the time of assuming control.
Sara Khairi | October 30, 2023
10-Q, Member Exclusive

It’s complicated: Big banks have a love-hate relationship with high interest rates

  •  Although it's a new season, things seem pretty much the same as the last quarter for big banks – except that the figures and their impacts have heightened.
  • The common underlying theme in Q3 was increased write-offs – but it's still raining profits for (most of the) big banks.
Sara Khairi | October 23, 2023
More Articles