Banking & Financial services from a non-bank?

Embedded finance platforms are benefiting businesses and changing the finance sector

By Philipp Buschmann, CEO and Co-founder, AAZZUR

According to embedded finance expert Simon Torrace, brands and businesses today “are looking to add more functionality and value to their customers, and financial services are a very attractive part of that. It’s a way for all kinds of companies in all kinds of sectors to hook into people’s everyday activities, create new relationships with their customers, and help businesses think differently about their space in the world.”

Now, if you had asked someone 10 years ago who they thought would be providing those financial services, they would most likely have said banks. That’s because for as long as businesses have been offering additional financial services (like loans or credit cards), those services have mostly been provided by banks.

And while far from the frictionless user experience available to consumers today, really those are the earliest examples of embedded finance – i.e. the embedding of financial services into non-financial spaces – it’s just no-one called it that back then.

But, for the most part, today it is not banks offering those services. It’s fintech businesses. ‘Buy now pay later’ (BNPL) via companies like Klarna and Afterpay; payment rails and digital wallets from Railsbank and Treezor; financial exchange and transfers from Wise; and aggregators like my company AAZZUR, that bring all these services into one place.

Now, thanks to these innovative fintechs, businesses and retailers from all sectors are improving their own offering by adding financial services. Across the UK, Germany and Belgium, 75% of retailers are using embedded finance to offer credit cards, BNPL schemes and loyalty incentives, while 56% are planning to introduce further financial services in the near future.

There are a few main reasons embedded finance is becoming so popular among businesses.

Additional revenue streams and increased KPIs

On top of their primary offering, businesses can offer bespoke financial services to their customer base and earn additional revenue. This can come via commission from the providers, the charging of fees for additional services or specialist accounts or earning on interchange.

Adding these services is also shown to increase retention and engagement. 87.5% of non-financial companies that have begun to offer financial solutions have increased engagement levels, while 85% said they have attracted new customers.

Quick and cost effective integration

Thanks to APIs, integrating with a financial services provider is quick, easy and cost effective and there are thousands of incredible, innovative financial products that online retailers can offer their customers to improve their experience.

Furthermore, due to embedded finance aggregators like my company AAZZUR, adding multiple different services can now be done with one integration. This is a fairly new development. In the past, even similar products had entirely different APIs. So although integrating with one financial service provider was quick and cost effective, finding and partnering with multiple providers could end up being surprisingly costly.

A good way to think about it is how your laptop, phone, tablet, router, headphones and sound system all have entirely different charging ports. Buying one charging cable is fine. Buying multiple charging cables – less so. The solution? A multi-adapter. That’s what an aggregator is. That is what AAZZUR offers.

Businesses can become one-stop-shops for financial services

Any digital business from any sector can now gain access to new financial products for their customers, including business loans, cards, virtual accounts, wealth management, insurance, cross border payments, foreign exchange and more.

Businesses can essentially become one-stop-shops for financial services, allowing their customers to conduct all of their financial business on their site and platform. They can even become banks themselves – something modern consumers have an appetite for. According to one report, most consumers under the age of 55 would be willing to open a bank account with non-banking providers like Amazon, Google, Starbucks and Uber.

Customer journeys can be hyper-personalised

Increasingly these services can be tailored to each individual customer and won’t just be offered at the point of sale but exactly at the point of need. At AAZZUR, we work with our clients to map out trigger points based on certain purchases. Customers are then offered value-add financial services they actually need exactly when they need them.

Think how Google uses data to monetise search, how social media uses it to monetise relationships. Embedded finance – with the help of open banking – allows businesses to do something similar with spending data.

With this data, they can create hyper-personalised customer experiences that offer financial add-ons customers genuinely need, when they need them. From the most specific insurance types to wealth management, travel money to carbon offsetting, all triggered by specific transactions and spending patterns.

By offering these personalised services, businesses tend to see an increase in sales too. According to one report by Gartner, organisations that invest in personalisation, typically outsell competition by 30%.

Whenever I’m writing about embedded finance, I always think back to that famous 2019 quote from Andreessen Horowitz’s Angela Strange.

She said “every company will be a fintech”. With embedded finance now easily available to almost any business in the world – and predicted to be worth $3.5tn by 2030 – it’s becoming pretty clear she was right.