Embedded Finance: Exploring its Exponential Potential

Meaghan Johnson and Paul Staples explored embedded finance, its competitive landscape and its potential and risks. Banking-as-a-Service (Baas) is an infrastructure layer of the bank whereas embedded finance is the application layer enabling brand new propositions out of the bank’s infrastructure layer. These propositions could be around enabling SME finance, automated B2B payments, cross-border remittances. Corporates can use embedded finance to add financial product offerings (lending, BNPL, insurance, etc.) as part of the total experience. Embedded finance can be offered by both banks and FinTechs. From a consumer’s perspective the ‘embedded finance promise’ is to offer a more relevant product / service tailored to their needs. Embedded Finance exists and evolves in two forms: [1] distribution agreements where the framework is to distribute financial products via platforms and [2] joint venture wherein a brand builds a new proposition and the bank brings the banking solution in deconstructed form.