Integrated Funding: Where Banking Services Converge EJINSIGHT


Integrated finance is becoming a hot topic in the banking industry. Although the concept is not new, it has taken on new dimensions through modern technology and innovative applications, and its impact and potential are notable.

Embedded finance can be simply defined as “the use of financial services by a non-financial business”. Familiar examples of integrated financing include the provision of vehicle financing by a car dealership, the provision of insurance coverage for retail purchases, and various financing options offered at the point of sale or service. Thanks to digitization, we now see a whole new world of possibilities for products and services to be combined or mixed through integrated finance.

The concept appeals to both consumers and businesses. From a consumer perspective, the integrated finance model streamlines financial processes through a “one-stop-shop” approach that makes it easier for people to access goods and services when and where they are needed. From a business perspective, integrated finance not only generates more sales, but also provides relevant data that can then be used to generate more future business.

It’s time to get away from the channel mindset

To succeed in this new era, banks must move away from the mindset of banking channels to face a future where individual banking services converge and are integrated into non-banking channels. Technically, this is only possible by bulk dialing and enabling the Application Program Interface (API). Composition separates abilities that were traditionally locked together in the bank’s monolithic tech stack. Individual components can be marketed, combined and monetized to differentiate and deliver customer value in context.

Advances in technology will continue to transform and improve integrated finance, expanding the financial ecosystem and enriching the customer experience along the way. With open digital technology, financial services can be delivered in context, meeting customers where they are, and even identifying the right customers at the right time.

A striking example of the integrated finance trend is the proliferation of popular Buy Now Pay Later (BNPL) payment options now available at the point of sale (POS). Consider this statistic on the trajectory of BNPL: BNPL’s global market size was valued at US$4.07 billion in 2020 and is projected to grow at a compound annual growth rate (CAGR) of 22.4% from 2021 to 2028.

In practice, integrated finance is often tied to unified lending as part of a bank’s strategy to increase customer engagement and provide a seamless digital experience. Other use cases for integrated finance include investment and trading applications, and insurance. Innovation will continue to thrive in this area, and banks must be involved for their survival.

Modern technology and service models allow banking and other financial services to be easily integrated into third-party services as part of a broader service offering. At the same time, regulatory changes in global venues – such as open banking – are encouraging collaboration between banks, fintechs and other third parties to increase competition and facilitate collaboration.

A critical moment

In principle, the integrated bank could change what it means to be a bank. At the basic level, a bank can choose to:

• Be the customer-facing brand
• White label its products under third-party brands
• Co-branding with third parties to show the synergy of their combined brands

Where to go next?

As open banking transforms into open finance, other financial products will be integrated with non-banking service offerings to further enrich the service proposition – the potential for innovation is truly limitless.

The ripple effects won’t stop anytime soon. While the most obvious goal of embedded finance is to increase consumer convenience, the concept is even more powerful in business applications, such as supply chain management. The continued impact of the global pandemic on the global supply chain only underscores the importance of this.

Consider the following emerging trends to watch in this space:

• With the growth of the Internet of Things (IoT), Supply Chain 4.0 is becoming a reality
• Financial institutions and other service providers will play a greater role in the emerging metaverse and “factory of the future”
• The increasing digitization of manufacturing and services with integrated finance should further align the financial supply chain with the physical supply chain
• Integrated finance will be an essential part of Industry 4.0 and banks can drive progress (if they don’t they will miss a major opportunity)
• Integrated finance heralds a new era of banking as a service (BaaS) where a bank provides a middle layer that connects customers to a rich range of financial services

As with any notable trend, the bank’s business and technology strategy must adapt and evolve. With the right approach, integrated finance can be leveraged to significantly expand and enrich your bank’s share of the digital banking ecosystem.

— Contact us at [email protected]

Kanv Pandit

Group Managing Director, APAC, Banking Solutions at FIS


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