Embedded finance is driving frictionless banking, powered by APIs

  • Financial products such as digital payments and lending are being increasingly integrated into vertical software-as-a-service (SaaS) solutions [e.g., Shopify launched Shopify Capital to support small and medium-size businesses (SMBs) on its platform by disbursing loans without the need for separate applications]
  • Embedding financial products helps platforms improve the overall user experience and increases the lifetime value (LTV) of their customers [e.g., Veeva, a customer relationship management (CRM) solution for pharma companies, added payments to its platform to integrate data and automate payment tracking for a simpler, more efficient process]
  • Banks and payment giants are collaborating with fintechs as part of their innovation sourcing agenda. According to a PwC survey, 94% of financial services companies stated that they were confident that fintechs would help to grow their respective company’s revenue over the next two years
  • Marqeta built a cloud-based card issuer and programme management platform that can be accessed via an API, an offering that was not available from the legacy processors until Marqeta introduced it to the market. Most of the recent innovative card issuer programmes are being built on Marqeta’s platform — examples include card programmes for startup unicorns such as Affirm, Postmates, DoorDash, Square, Favor and Instacart
  • Stripe built lending and treasury products that can be accessed via APIs and seamlessly embedded in any digital platform ecosystem — Shopify expanded its partnership with Stripe to power Shopify Balance, the business account that will be built specifically for independent businesses and entrepreneurs
  • Surecomp built a trade finance API platform, APIsure, and is setting the standards for open trade finance banking. The open banking architecture enables banks, corporates and fintech companies, across the trade finance ecosystem, to break down legacy barriers and exchange data, functions and applications in real time
  • ING created an internal API layer to co-create and accelerate innovation through a collaborative developer ecosystem — providing developers access to selected, simulated ING APIs that they could use to create new and innovative customer experiences. Other big banks such as Citi and JP Morgan have also created API platforms to open up their systems
  • MasterCard launched Mastercard Innovation Engine, an API-based digital platform that enables issuers and merchants to provide digital capabilities to customers. Visa and Amex are also using APIs to reduce partner integration and onboarding complexity
  • Banks should embrace more fintech partnerships as part of their innovation sourcing strategy. It is often far less expensive for a bank to work with a fintech to improve its digital services than build the entire product stack on its own
  • To leverage the benefits of rapid integration with fintechs, a robust and intuitive developer experience is the basic foundation through which banks can expose internal assets and algorithms
  • Financial institutions should also utilise new distribution channels such as on-demand and e-commerce platforms that enable better, differentiated products to spread easily and at lower customer acquisition cost. In the end, consumer experience is key, and instead of separating banking services from the other services that customers use, bundling products (that fit the context) would increase adoption and reduce costs significantly.

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