Embedded finance: The voice of the makers

A new generation of financial thinkers and makers is reimagining the conventional bank. Empowered by technology and a youthful hunger for change, they’re determined to make banking easier, more accessible, and more impactful.

Their modus operandi is embedded finance, a nascent yet growing banking approach with transformational potential that is sowing seeds of opportunity not only for banks, but also for their wholesale and retail clients.

In collaboration with Red Hat and the Banking Industry Architecture Network (BIAN), the IBM Institute for Business Value (IBV) has conducted extensive market research on this strategic topic. Enriching this research is a series of thought-provoking conversations with a panoply of experts and makers whose commentary substantiated our research. They shared their personal perspective from privileged viewpoints inside and outside financial services.

Comprising this ecosystem of experts are:
 

• Bancolombia: Maria Cristina Arrastia Uribe, Business Vice President
• BBVA: Carmela Gómez Castelao, Head of Open Banking
• BMO: Lawrence Wan, Chief Architecture and Innovation Officer
• Bradesco: Fernando Freitas, Head of Innovation
• DBS: Alfian Michael Sharifuddin, Head of Tech and Operations
• Doku: Sujit Unni, Growth Advisor
• Enel: Giovanni Vattani, Global Customer Operations
• HSBC: Shayan Hazir, Chief Digital Officer for ASEAN
• ING: Brendan Donovan, Global CIO of Wholesale Banking
• JPMC: Timothy Ness, Vice President and Senior Manager of Digital and Open Banking
• Lloyds Banking Group: Jasjyot Singh, CEO of Consumer Lending
• Mizuho Bank: Andy Nam, CIO for Asia and Oceania
• Raffles: Quek Sin Kwok, Medical Group Chief Digital Officer
• Raiffeisen Bank International: Sudip Khan, Open Banking Leader
• SEB: Christoffer Malmer, Head of SEB Embedded
• Standard Bank: Jorg Fischer, Group CIO
• Starling Bank: Sam Everington, Engine CEO
• Stripe: Kevin Dowling, Head of Partner Solution Engineering of EMEA & APAC
• TD Bank: Gina Stille, Vice President of Business Architecture
• Unipol: Giacomo Lovati, Chief Beyond Insurance Officer
• UOB: Arvid Swartsenburg, Head of Digital Strategy and Transformation
• Wells Fargo: Steve Hagerman, CIO for Consumer Technology

Their vision couldn’t come at a better time. Socially and economically, the world is becoming progressively more digital and interconnected. End consumers are rapidly adapting to technology while small and medium-sized businesses are developing a growing appetite for seamless access to financial services. 

“Embedded finance has already found its place in many real-life scenarios.”

Arvid Swartsenburg, Head of Digital Strategy and Transformation, UOB

Financial institutions are struggling to keep pace. Yet, amid complex macroeconomic conditions that challenge traditional banking revenue models, they can extract new business value by eliminating friction both across and within entire industry verticals. In the process, they can redefine banking as we know it.

Digital-savvy financial institutions are pragmatically investing in business culture transformation, new operating models, and exponential technology to future-proof their business foundations on digital platform economies. It’s therefore no surprise that 70% of banking executives say embedded finance is either core or complementary to their business strategy, not just an initial bet.

Not a nice-to-have
Embedded finance is now central to 1 in 4 banks’ business strategies.

While the term “embedded finance” may be a recent addition to our lexicon, it’s not novel. For decades, banking customers have been able to access financial products on non-banking channels and partners. What’s new is the radical shift in the way clients consume banking and insurance services in the moment and location of their need.

“Embedded finance is not just a passing trend. It broadens the ways to engage with other people who are not just standalone consumers and businesses.”

Jasjyot Singh, CEO of Consumer Lending, Lloyds Banking Group

Across our conversations with this diverse international ecosystem of experts, six themes are recurrent: decoding embedded finance; the tension between short-term ROI and long-term vision; modern architecture and exponential technology; risk and compliance issues; changing customer expectations; and the inertia of existing culture and mindset.