An Embedded Banking Primer

By Daniel Haisley, EVP of Innovation

I’ve just returned from FinovateSpring in San Francisco, where I had the opportunity to speak about embedded banking — one of the more interesting growth opportunities to emerge for financial institutions in recent years. Though this concept has been gaining significant buzz in the industry, it’s clear that many banks and credit unions are still learning what it’s all about and how it might complement their existing digital strategy.

So, let’s clarify exactly what embedded banking is and who can benefit. At the highest level, embedded banking involves financial institutions serving their customers through the software of third-party partners who otherwise do not provide banking services. A financial institution will enable an end user who is logged into a separate application — like a practice management software, a payroll provider, or a tax solution — to perform banking functions like viewing their accounts and transactions, making payments, originating deposit accounts, and originating credit facilities.

In addition to the end user, there are three primary players in an embedded banking scenario:

  1. A financial institution serves consumers and small businesses with the banking tools and services it always does, such as the ability to check balances or make payments.
  2. A partner platform, such as an ERP solution, insurance application, budgeting tool, and more. The realm of potential partner platforms is vast and continues to expand with the proliferation of new start-ups hitting the market every day and existing market powerhouses continuing to evolve their solutions to facilitate connectivity and expanded functionality.
  3. A technology enabler, like Apiture, that facilitates the connections between the financial institution and the partner platform through easy-to-implement embeddable components and well-defined APIs to make it as easy as possible for the partner platform to host financial services.

Think of embedded banking like putting a branch inside a supermarket. There’s a win–win–win: The customer has the convenience of getting more done on a single trip, the supermarket can differentiate from its competitors in an otherwise commoditized space, and the bank can better serve existing customers while also reaching new ones.

Intrigued? Clearly embedded banking represents an interesting opportunity for financial institutions to increase their relevance with existing customers and reach new ones. To learn more about how to get started with an embedded banking strategy, contact us today.


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