Banking and financial services are being reinvented every day, and competitors – from lending to investing, banking and beyond – must find new ways to retain and grow revenue through digital-first capabilities that meet changing market needs.
Digital adoption, which was driven by Millennial and Gen Z consumers as they gravitated toward digital services, has become more mainstream over three years’ worth of digital evolution that accelerated during the pandemic.1 And, digital demand is still expected to grow exponentially in the marketplace as the buying power of younger generations increases2. Financial service providers know they must attract and retain customers by seamlessly integrating new capabilities into their suite of offerings.
Building a smart, future-proof embedded finance solution
The embedded finance market alone is predicted to reach a value of $230 billion by 20253 – a huge opportunity – but building technology from scratch, that creates a scalable and sustainable competitive advantage is too slow and expensive for most players.
Competitors need to pursue capital-light business models that allow them to be quick and nimble in this fast-moving market while still taking the time to plan appropriately for a strategy that can stand the test of time. Many financial service providers understand that integrating embedded finance is not simple. There are numerous layers of complexity that sit between the underlying technology and the services that enable a solution to run in a compliant, scalable, and profitable way.
While it might sound great to get an embedded finance solution up and running in 30 days, there can be significant trade-offs when it comes to long-term goals, like being able to add features or scale the program. Many of these quick-to-market solutions are so turnkey and rigid that there’s no room for flexibility or customization, forcing businesses to make tough choices about how to proceed as they grow.
A seasoned embedded finance partner is equipped to help integrate these tools, monetize the investment, and support the administration of the program, and they will know how to navigate key regulations to offer more control over lower cost and risk.
It’s important to balance speed to market with smart, strategic planning to ensure you launch a stable, reliable program that can scale. A partner that can guide and support your technical and product teams through this journey is essential.
This is especially important as your customers’ needs and other market factors continue to evolve. Your embedded finance strategy should also have solid financial modeling a long-term forecast and be able to expand the breadth of solutions and scale alongside the business for maximum ROI.
Learn more about what it takes to go from API to ROI with an embedded finance solution in Netspend’s latest ebook. Download Value-Added Finance: Uniting Finance and Technology to Increase Brand Value, User Loyalty and Revenues.
1. McKinsey “How COVID-19 has pushed companies over the technology tipping point—and transformed business forever October 5, 2020 https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever
2. Insider, “The 40-year-old millennial and the 24-year-old Gen Zers are in charge of American right now,” September 2021 https://www.businessinsider.com/24-gen-z-trends-40-millennial-spending-changing-economy-2021-9
3. 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