Saying that the embedded finance space is crowded would be an understatement. By 2025, embedded finance is expected to have an estimated market value of just under $230 billion1. It’s safe to assume that those companies that are new to the space might feel overwhelmed by the sheer number of partners to choose from.
So, what are some deciding factors to consider? The end goal of an embedded finance partner comes down to three core qualities: simplicity, flexibility, and scale. Achieving those goals starts with a partner that has the infrastructure to help you develop and integrate products into your existing ecosystem. A sleek UX and product features matter, but to make all that work count, you must have the right technical foundation to build from. Once you’ve established the right framework, the potential to continually innovate sets the tone for delivering better end-user experiences.
Here are some “must-haves” to help select the right partner:
Deep Industry Understanding and Network
Integrating a financial product requires a deep understanding of the regulatory requirements within the financial services industry. The technology, risk, compliance, and fraud management capabilities of your embedded finance partner are essential to reliably offer consumers compliant financial solutions within your digital environment.
It is important to work with an embedded finance partner that has a deep industry network already integrated into their own ecosystem, and is experienced with guiding clients through many complex considerations. Ensure they can demonstrate their due diligence requirements and look for a partner that has market-proven expertise that backs up how their solutions can best serve your audience.
Consider the End-User
Checking off the regulatory requirements should be at the top of your list, but before you get further down the integration funnel, you’ll want to first determine how a specific embedded finance partner can help you achieve the ultimate goal: delivering a simple and secure environment for your customer to do more within your ecosystem. In short: the right partner can help you better serve your end-user and reach the customers in your ideal customer profiles.
In the case of embedded finance solutions, the primary goal is typically to make the customer experience more seamless and efficient. But, there are other ways that partners can assist you in reaching customers and growing profit. Embedded finance solutions should ideally help you better understand your customers and their spending behaviors. With the right data, businesses can create a better customer service experience or focus efforts on a specific customer base – whether that looks like growing an existing customer base or venturing into new territory.
Consider the Larger Network Opportunities
A quick analysis of this market may reveal several partners who, on paper, check off a laundry list of slick features that seem right for your organization. But within the complexities of embedded finance, the real difference comes down to a combination of expertise and capabilities. Do they have the depth of knowledge to navigate compliance matters — and is their system set up to support compliant, enterprise-grade technology? You must ask those questions throughout your decision-making process.
For instance, the right embedded finance partner will be able to guide you through the complexities of payments regulations, fraud management, technology, and infrastructure, and introduce you to a rich network of financial industry partners. Consider where the partner's capabilities exist across money movement and retail distribution networks.
Features and functionality matter, but when it comes to integrating with a partner that can help you launch an embedded finance program that aligns with today’s complex industry requirements, doing your homework on the people and partnerships behind the tech is what will deliver real results. While it’s not ideal, if a partner is not delivering, there are plenty of other embedded providers that can easily plug-in to your current program with a customizable, built-for-the-future strategy.
If you’d like to know more about establishing a successful embedded finance program or how embedded finance solutions can help to enhance your current products and solutions, we invite you to download our free ebook on the topic entitled, “Value-Added Finance: Uniting Finance and Technology to Increase Brand Value, User Loyalty and Revenues.”
1. Business Insider, “The Embedded Finance Explainer: Nonfinancial companies are increasingly looking to offer financial products via their platforms—here's how innovative FIs can partner with them to capture a $7 trillion opportunity,” January 22, 2021 https://www.businessinsider.com/embedded-finance-explainer