Embedded finance: Creating the everywhere, everyday bank

The platform economy has transformed how consumers experience the digital world, with dramatic implications for financial institutions. Rather than going to the bank—physically or digitally—consumers and businesses want the bank to come to them. 

Institutions that don’t embrace embedded finance offerings are at risk of losing relevance and customer loyalty as competition intensifies. A cohort of neobanks and digital banks have popped up almost everywhere—and platform-based banking services offered by fintech startups and non-financial businesses are capturing significant embedded finance market share 
 
Relying on traditional business models has curbed most banks’ abilities to recapture sustained profitability and stronger market capitalization. Embedded finance services can help improve business performance by expanding transaction volumes rapidly, capturing new customers, improving user experience, and adding new revenue streams.

Embedding finance into the client journey 
 
As clients become accustomed to hyper-personalized end-to-end experiences, they will be less willing to accept friction when accessing finance solutions. Leveraging ecosystem and customer data and insights generated by artificial intelligence, financial institutions can be ready to serve their clients whenever and wherever a financial need arises. 

Embedded finance enables traditional banks to engage with clients on the digital platforms and marketplaces they’re already using, integrating via secure application programming interfaces (APIs). This puts ecosystems at the heart of a successful business model. 

In addition to owning all levers in a product-centric value chain, CEOs can now also create business value through ecosystem collaboration. Client and business relationships are no longer transactional. They’re symbiotic. 

70% of banking executives say embedded finance is either core or complementary to their business strategy.

So, how can banks make the most of the opportunities that are emerging? To find out the IBM Institute for Business Value (IBM IBV) in collaboration with BIAN (Banking Industry Architecture Network) and Red Hat, surveyed 1,000 executives from international financial institutions about the role embedded finance plays in their business strategy. We also surveyed 12,000 consumers of financial services in 12 countries to identify emerging consumption patterns. 

Digital finance goes mainstream: Most consumers now apply for loans, manage investments, and purchase or renew car insurance online. 

 
When we asked consumers where they prefer to deposit their salary and keep their savings, 80% said a traditional bank account. But 16% are already comfortable with a branchless, fully digital proposition—with that figure significantly higher in certain markets.  
 
As for financial institutions, 70% of executives say embedded finance is either core or complementary to their business strategy, not just an initial bet. What’s more, nearly three in four banks are implementing or have gone live with an embedded finance strategy.
 
But does embedded finance have staying power? Download the report to explore insights that answer four key questions: 

• Are consumers ready to bank on the platform economy? 

• Is embedded finance more than hype?

• Where can banks remove friction to accelerate transformation?

• How can banks elevate their role?