Embedded finance may be the future, but it is a long time coming.
Why is embedded finance taking so long?
The Banking Scene just ran a great survey and found that the biggest pitfall in the offering of embedded finance wasn’t technology-based but rested squarely on the hesitancy of compliance departments!
The survey of Banking Scene members and interviews with industry leaders from OpenPayd, ABN AMRO Bank, Rabobank, and KBC Bank provide a great take on embedded finance efforts from the practitioner’s perspective.
Unsurprisingly, the hold-up in embedded finance isn’t all technological but deeply rooted in bank culture.
👉TAKEAWAYS
Embedded finance emerges not merely as a technological leap but as a profound shift in mindset, strategy, and the fundamental delivery and consumption of financial services.
The strategic objectives for embedded finance range from democratising financial services and extending existing strategies to exploring additional service channels and fostering the ultimate customer convenience.
Hurdles: encompassing cultural shifts, partnership dynamics, technological complexities, and the ever-present need for compliance within a regulatory landscape.
A holistic approach to embedded finance is required to address not only technological advancements but also organizational transformation, collaboration, and a unified vision.
Embedded finance not as a standalone business unit but as an integral extension of existing strategies.
Compliance continues to be the biggest hindrance to offering embedded finance.
👊STRAIGHT TALK👊
The Banking Scene’s Embedded Finance report shows just how difficult it is to change bank culture.
The reality is that embedded finance is now less a technical problem and more a compliance and cultural challenge.
This, of course, begs the question: “So what’s the hold-up?”
While the Banking Scene survey puts the burden squarely on the compliance department’s shoulder, the interviews with banking experts show a more nuanced view.
In the interviews with four embedded finance experts currently working at more advanced banks, the consensus is that the delay is cultural.
While this is never expressed in the interviews, between the lines, you can hear a collective sigh from all personnel interviewed that banks simply can’t and won’t change overnight to deliver embedding, no matter how good an idea it may be.
One thing that the Banking Dive report misses is how much delaying embedded solutions will cost banks.
I grant this is a tough number to estimate, but the longer banks delay, the bigger it will be, and the more business incumbents will lose to neobanks and big tech.
Thoughts?
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