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How Embedded Finance Is Driving a New Wave of Fintechs
By Ankit Shah, Global Head of Fintech at GTN
In the dynamic landscape of financial services, we're witnessing an increasing number of non-financial digital entities expanding their offerings to include embedded financial products. This innovative integration of financial services into a company's primary digital ecosystem has become a key driver in transforming traditional businessand paving the way for new fintechs.
The rise of embedded finance is largely attributable to supportive regulatory environments as well as access to affordable capital, particularly before interest rates began to escalate recently. Without this support from regulators and venture capitalists VCs, achieving such rapid growth would have been much more challenging.
Change and Catalysts
A look back at financial practices reveals that Baby Boomers were accustomed to calling their banks for trades or borrowing money and often had to queue at physical bank branches. In earlier decades, trading involved open outcry methods while trust in banking institutions was growing, and credit cards were expanding rapidly into developed economies. Today, digitalization has revolutionized banking services by enabling instant access through smartphones, enhancing the reach of credit cards globally, and facilitating online trading platforms.
Embedded Finance and Its Appeal
In today's world, consumers increasingly prefer to stick with their preferred digital ecosystems for everyday tasks rather than adopt new platforms just for specific purposes. By embedding financial products into apps, businesses enhance user engagement, retention, and overall customer lifetime value as users rely more heavily on the app for various services.
Chipper Cash is an excellent example of this strategy in action. Initially focused on money transfers, payment accounts, and card services, the company expanded its core offerings to include stock investments by partnering with licensed financial institutions that provided APIs and brokerage infrastructure. This allowed Chipper Cash to quickly introduce investment services without requiring extensive regulatory compliance.
Convenience is a primary benefit for users who can now execute trades alongside their existing banking activities from a single app, eliminating the need to navigate multiple platforms or services.
Unleashing Potential
Embedded finance presents a multitude of opportunities and challenges for fintechs looking to thrive in today's market. Financial institutions that are nimble enough to capitalize on these trs stand to gn significant advantages in market penetration, particularly by driving usage and client acquisition. Those who adopt such solutions will likely secure long-term success, with some potentially forging ahead of their competitors.
The imperative for organizations across industries is becoming clear: they must identify ways to make their businesses more粘性（sticky）by incorporating functionalities like investing, ling, insurance, payments, cash management, and beyond. Companies that do not seize this opportunity risk being left behind in the rapidly evolving fintech landscape.
In , embedded finance represents a transformative force reshaping the financial services industry. It's essential for companies to recognize these dynamics and develop strategies to leverage the opportunities presented by such innovations if they wish to secure their future position in the market.
GTN Asia Financial Services Pte. Ltd.
20th Sep, 2024
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