Tāmaki Makaurau – Barely half a century ago, people’s finances, business, and everyday life were managed in distinct ways. Cash was withdrawn to pay for groceries, people paid for good by cheque and getting a line of credit could be difficult if someone was not a large company or wealthy individual.
But today, the ability to do all these things is woven into the fabric of websites, apps and marketplaces.
Around the world, people are seeing a blurring of the lines between commerce, financial services and payments, Anthony Jones, head of digital partnerships, Visa Australia, New Zealand and South Pacific says.
Jones is a key speaker at the at the FinTechNZ hui taumata in Auckland on February 28.
“These experiences have become so seamless, most of us probably don’t think much about the role embedded finance plays in our everyday lives,” he says.
“Jumping in a rideshare? The fare is charged automatically when you arrive at your destination and the driver is paid instantly to a virtual card. That’s embedded finance.”
Brands and non-financial businesses are integrating financial products or services – like payments, banking, lending or insurance – that ease and enhance the user experience within their platform. Customer-facing brands risk falling behind if they don’t offer an embedded finance strategy.
Think small businesses. Previously, processing invoices took time, multiple steps, and often multiple software applications. Now, small business owners can do this within their accounting or operating platform with a virtual card, allowing them to get to the rest of their to-do list.
Improved infrastructure has also enabled non-financial companies like retailers to offer banking services like debit cards and rewards.
They didn’t have to develop the capabilities to get you that card — they likely tapped a Banking-as-a-Service (BaaS) platform to develop the product for them on the backend. The fintechs offering these specialised infrastructure services are typically focusing on a specific area of expertise and on doing it well, instead of building the entire banking stack themselves.
This crop of fintech enablers or fintech fabric players, as some have described, are making it easier, faster and less costly to embed financial tools into platforms that did not historically focus on financial services.
This certainly rings true in New Zealand’s fintech sector, which has reported a five-year compound annual revenue growth rate of 32 percent according to TIN’s 2022 fintech report. All parties not just fintechs can win when it comes to embracing and investing in embedded finance.
For consumers, there is an inherent convenience of accessing financial services in the digital spaces that already have their time and attention and seamlessly fit into their daily lives.
The prevalence of embedded finance is symptomatic of massive shifts in business needs and consumer expectations baked into today’s financial services experience. Businesses want to grow their offerings and increase engagement. And consumers want products and services that are fair, easy to understand and interact with, and that seamlessly fit into their daily lives – the good news is, more of this is on the way.
