Open banking and the rise of FinTech are causing revolutionary changes in the financial services industry. In the face of disruption, banks are evolving and transitioning away from product-oriented strategies to become more customer-centric. Offering financial services outside of physical branches meets customer demand, allows banks to reach new demographics, and opens new revenue streams.
Embedded finance is an essential aspect of developing a customer-centric banking model. It integrates services seamlessly into non-financial platforms, creates new touchpoints, and enables customers to access banking products within their daily interactions. Developing such an interconnected financial ecosystem keeps banks competitive as new, agile competitors emerge. This positions them as innovative purveyors of convenience — a necessity as the role of banks in the digital economy continues to evolve.
In the not-so-distant past, banks were seen primarily as sellers of savings and checking accounts, loans, and credit cards. This banking-as-a-product business model relied on brick-and-mortar locations and involved customers physically visiting branches for transactions and assistance. In an increasingly digital world, the model progressively gave way to online banking for efficiency and accessibility.
Today, customers expect banks to embrace digitalization in the form of virtual financial advisors and banking-as-a-service. Beyond that, modern banks use APIs to facilitate open banking and allow third-party providers to access bank data securely with customer consent. This enables the development of new financial products and services based on customer data from multiple institutions. However, within the current business model, banks still only have limited ways of facilitating customer experience outside of their own channels.
Further use of APIs is required to embed financial services into third-party apps and platforms and provide a way to guide customer experience and remain part of customer journeys that take place outside of banks’ channels. It creates an as-a-service platform that allows third-party providers to integrate with banks and provides a singular view of customers. Banks now can position themselves as vital financial partners in the digital age, bolstering their market presence in an increasingly competitive landscape. However, the next stage of evolution is right around the corner and banks should already be preparing for their future role.
Future-proof financial services
Just as banks have quickly adjusted to embrace a customer-centric model and adopted APIs for interconnectivity, further change is on the way. The next step in the evolution of banking services is to become fully embedded in daily life and omnipresent. In the future, banks will assume a position at the top of the financial ecosystem, coordinating activity and integrating with additional businesses to extend services to other devices.
In the next evolution, banking-as-a-lifestyle, financial services will be available in connected platforms belonging to retailers, software companies, travel agencies, fitness apps, smart home tech, the metaverse, and social media. Banking experiences will become part of the daily routines of customers. Providers will offer personalized, convenient, and innovative financial solutions to increase customer loyalty and drive revenue.
Evolution will be enabled by APIs, microservices, and the cloud as the financial ecosystem grows even more customer-centric and banks gain a larger influence over the experience provided across all channels, including those of third-party providers. Banks that implement APIs to enable open banking and embedded finance today are already taking the first steps to establish themselves as a bank of the future.
SoftServe builds an API platform and reference app to facilitate banks becoming part of the growing integrated ecosystem of intelligent financial services. This connects banks with non-financial partners to deliver interrelated customer journeys. The customizable embedded finance solution is built on top of banks’ legacy systems to enable channels of distribution to provide financial services within contextualized customer journeys. The solution allows banks and non-financial partners to increase touchpoints with customers while reducing dependency on technology providers and platforms.