A Finextra webinar this week brought together experts from Banking Circle, Citi, UBS and Finastra to discuss the future of embedded finance and how its growth will affect banks in future. Hosted by Global Payments & Liquidity Expert, and Finextra contributing Editor, Scott Hamilton, discussions focused on how financial institutions need to strive to meet the customer where they are, and improve the customer experience.

Tony McLaughlin, who is responsible for Emerging Payments and Business Development in Citi’s Treasury and Trade Solutions (TTS) business, reminded the audience of the shift that has been taking place over recent years, but intensified from early 2020: banks originally built branches on High Streets because that’s where customers were, but today customers are on digital platforms so banks need to be there too. He went on to explain that the only way banks can get onto digital platforms to serve customers is through standardised APIs.

Anders Olofsson, Head of Payments and Open Banking at Finastra, added that digital platforms are built to facilitate the customer journey and banking must fit within that as part of the journey, rather than being at the centre waiting for customers to come direct for their banking services. He added that to fit into this journey, banks must decide whether to focus their resources on ‘manufacturing’ or ‘sales and distribution’ of solutions.

Banking Circle’s co-founder and CEO, Anders la Cour, agreed, adding that focusing on providing one core service is key for banks and FinTechs alike. He believes FinTechs should stick to their core, going narrow and deep and utilising the advantages they have as a business, such as lack of legacy technology. Banks, meanwhile, should focus on what they’re good at, which will vary depending on the type of bank. Ultimately, they will need to leverage partnerships that fit alongside their core, to embed applications that are suitable to distribute to their own client base.

Beat Bannwart, who is responsible for Digital Transformation & Ecosystems, WMPC Tech at UBS, agreed that partnerships are the best way to add additional solutions. He pointed out that while FinTechs bring great ideas and have focused on a very specific case to perfection, they will benefit from partnering with banks, who have a large client base and a more holistic offering. Marrying the strengths of each party will bring an attractive solution to life, he says.

Joining the customer journey

Beat Bannwart expanded on this later, explaining that banks used to offer specific products and a customer would independently decide what they needed and then go to the bank that offered those products. But, he says, that is no longer the case. Today, when a customer wants to buy a house, for example, they go to a platform for advice and to seek solutions from a wide range of providers. Banks are trusted experts and can provide both advice and a wider range of solutions if they have the right partnerships in place.

The panellists agreed that the customer journey does not start with the bank, and that instead it is important for banks to recognise where they can become a point along that customer journey. Through collaboration, banks and FinTechs increase their opportunity to gain market share by coming alongside customers to fulfil all their requirements, together.

Banks vs BaaS

An audience poll revealed that FinTechs prefer to work with a Banking as a Service (BaaS) provider, to deliver embedded finance solutions, rather than a bank. Banking Circle’s Anders la Cour was not surprised, but felt that both providers are important, to varying degrees depending on who is accessing the embedded finance solution. For this reason, Banking Circle is building an ecosystem in which both BaaS and bank solutions are accessible.

Tony Mclaughlin agreed that there is space for both, pointing out that while the world is big, the digital world is even bigger. On a High Street, banks may be forced to compete for physical presence in the limited space, but digital finance and the digital economy can grow unbounded, delivering solutions that support the customer on their unique journey.

If you missed the webinar, you can access a recording here.

Participants:

• Beat Bannwart, Digital Transformation & Ecosystems, WMPC Tech, UBS
• Anders la Cour, Chief Executive Officer, Banking Circle
• Tony Mclaughlin, Emerging Payments & Business Development, Citi
• Anders Olofsson, Head of Payments and Open Banking, Finastra
• Scott Hamilton, CTP, Global Payments & Liquidity Expert, Contributing Editor, Finextra