Trends in financial services come and go. But embedded finance has been hailed as the future of financial services and shows no signs of disappearing. With global capital investment soaring to $4.2 billion in 2021 and transactions projected to reach $7 trillion by 2026, it's no surprise that this year's Fintech Talents Festival (14-15 November 2022) is dedicating an entire stage to the topic.

What is Embedded finance?

Embedded finance is when non-financial companies include financial products and services in their offerings. Common examples include e-commerce websites providing micro loans at checkout through a buy now, pay later (BNPL) option or ride-sharing companies such as Lyft and Uber offering drivers access to credit and debit cards in-app.

We caught up with our very own Miroslava Betinova, Head of Fintech at Griffin, as she prepares to join this year's Fintech Talents festival stage alongside a stellar lineup to explore all things embedded finance, the role partnerships can play in its success, and future trends to watch out for.

Q: As someone with their finger firmly on the fintech pulse, do you think embedded finance is here to stay or just another hot topic of the moment?

Some innovations become so intertwined in our everyday lives, it's hard to imagine what we did before them. Embedding banking and finance products is here to stay, and I believe it will evolve, taking on a new and even better dimension in the future.

As our lives become increasingly digital, how we interact with financial products has fundamentally changed. Alongside simple and secure digital experiences, we now expect banking services to be part of our everyday lives- rather than an inconvenient or stressful diversion. This is the promise that embedded finance delivers.

I think we will see its application expand beyond one-click payment services like Uber (combining a taxi ride with in-app payment) to more complex payment and transaction models, such as early mortgage repayments via jam-jarring or transaction round-ups. Until now, embedded finance has mainly dominated the retail, transport and accounting markets. But in the future, I see it transforming how consumers use more traditional financial products like pensions and mortgages.

Ultimately, embedded finance is here to stay. It enables brands to give consumers the financial services they need, when and where they want it‍—‌allowing them to play a more relevant role in the lives of their customers and engage them in new and exciting ways.

Q: What do consumers stand to gain from embedded finance?

When was the last time you got excited about making a payment? Never, I would guess. It's not something we enjoy, but it can't be avoided. By making payments a seamless process, embedded financial products make the buying journey easier from a practical and psychological perspective. Embedded finance solutions are designed to make finance effortless and intuitive for consumers.

That said, we need to be aware that as embedded finance becomes easier and more accessible for consumers, opportunistic criminals will be waiting in the wings to exploit it. So for today's providers, it's not just about delivering consumers a fantastic experience;  they are also responsible for putting the proper measures and guardrails in place to minimise fraud and exploitation.

Q: What role do partnerships play in the rise of embedded finance?

One of the best things about embedded finance is that everybody benefits from it. Consumers get the next-gen banking experiences they deserve, and companies can unlock new revenue opportunities. If the right approach is taken, it's a win-win on all fronts— for banks, fintechs, consumers and society.

That's why partnerships are crucial for creating the right ecosystem for embedded finance to flourish. If banks and fintechs can come together and focus on delivering the best consumer experience possible, it will drive growth and unleash more innovation in the sector.

It's no surprise that fintechs are leading the way in forging partnerships; after all, it's in their DNA. Recently, we've seen the likes of eToro, a social investment platform, join forces with embedded finance provider, OpenPayd. We've also seen Gigable; a gig economy platform, announce its partnership with embedded finance experts, Weavr, to give customers real-time control over their finances.

Q: What should companies look for when choosing the right embedded finance partner?

New players are popping up all the time, so it is worth defining what you need from a partnership before diving in. In simple terms, an embedded finance partnership should solve at least one of the following issues for your business:

• Speed to market
• Cost reduction
• Value enhancement
• Scale and growth

Of course, not all embedded finance partners are created equal. To find the right one for you, i'd say  you should consider a few key things:

• Is their tech compatible with yours? Will integration be straightforward?
• Do they have the right licensing and onboarding process to drive future growth?
• Is their risk appetite aligned with yours?
• Do they have adequate fraud detection and prevention measures in place?
• Are their culture and values a good match?
• Do you share the same vision for the customer experience?
  

Q: What are some of the challenges embedded finance faces, and what do you see coming down the line in the future?

Embedded finance still has to plug into core banking technology to work. But most banks are still running on legacy tech, with APIs that were only ever intended for internal use. This is a significant barrier to success, and incumbents must tackle it sooner rather than later. There are a lot of inherent risks in trying to layer modern software on outdated core infrastructure.

Fintechs need a modern, self-service operating system for embedded finance that will give them access to the infrastructure they need every step of the way, from launch to mainstream success.

While many middleware banking as a service (BaaS) providers simply build on legacy banking infrastructure, I believe we'll see the rise of full-stack BaaS providers that offer everything under one central platform. Fintechs and innovative brands can work with one partner to quickly bring a wide range of products to market with less up-front investment.

Griffin's full-stack BaaS platform will help fintechs realise embedded finance's full potential to drive growth and deliver a superior experience to customers.

Keen to learn more about the future of embedded finance?

Join this year's Fintech Talents Festival to hear Miroslava and her fellow panelists discuss: Embedded finance: partnering for success. The session takes place on Monday, 14 November (Day 1) at 16:40 pm. Click here for the full schedule, event location, and registration details.