Can embedded finance help lift the UK’s growth prospects? A Panel
24th August 2022
A summary of the panel on embedded finance in response to the current cost of living crisis.
Fintech Alliance held a community meetup yesterday (Wednesday 21st July) that featured a panel focusing on the current economic crisis and how embedded finance can help. The speakers gave brilliant insights and differing opinions on the future of embedded finance, so much so the discussion could have continued for the rest of the evening.
Here are our main takeaways.
Meet the speakers and what ‘embedded finance’ means to them
Alistair Brown
Alistair is the VP, Global Head of Open Banking and Payments for EPAM Systems, a global IT consultancy group transforming businesses through the introduction of technology. For Alistair, embedded finance is a progression of open banking that enables businesses to take control of payment flows and improve loyalty from customers.
Irfan Khan
Irfan is the founder and CEO of mmob, an embedded finance technology provider enabling service providers to embed their products within the channels of digital brands. For Irfan, embedded finance refers to third-party services accessed natively through any distribution channel and is crucially much more than payments as the industry often assumes.
Iana Dimitrova
Iana is the CEO of OpenPayd, a digital BaaS and embedded finance provider focussed on delivering the infrastructure for businesses to move funds cross-border in a faster, seamless way. Iana admitted that as an industry we don’t know what embedded finance is just yet (mirrored by OpenPayd’s experiment at Money 20/20). Payments are a regular pain point for users and have been the catalyst for embedded services, but future applications are largely undiscovered at present.
James Bryce-Lind
The panel was expertly moderated by James, Head of Strategic Development of Minna Technologies, a subscription management service embedded within bank technology. In an attempt to describe embedded finance to a 10-year-old, James described embedded finance as financial services in a product or service you wouldn’t expect it.
Our three key takeaways
Access to services will help users in the current cost of living crisis
Alistair raised the example of businesses such as Pezesha in Kenya that use embedded lending to support unbanked merchants gain access to capital. Mobile phones have created opportunities to support the unbanked populations globally which should be channelled to the UK too, rather than focussing embedded finance on groups that are already financially savvy. Irfan spoke about the motivation behind businesses wanting to embed financial services and they are often interested in improving user retention, rather than generating revenue. By positioning complementary services at a point of need, users gain access to products they wouldn’t have otherwise, helping users save money and improve trust which is crucial during this crisis.
Regulators represent both an obstacle and opportunity for embedded finance
When discussing global markets, the panellists agreed that other regions are using the learnings from the UK’s development to avoid shortfalls and advance their embedded finance industry. The GCC are rolling out regulatory frameworks similar to OBIE and FCA, while Australia’s Consumer Data Right (CDR) has opened user data beyond the open banking capabilities in the UK. While the industries are different (for example, there are four large banks in Australia that continue to dominate following acquisitions of fintech companies), the steps taken by UK regulators have proven valuable for the global embedded finance movement.
Regulations can be a point of contention though. Iana questioned where the responsibility for the user lies, particularly in whitelabelled embedded solutions where users may not realise they are interacting with a third-party. Within mmob’s onward journeys, as soon as the user has entered the onward journey and started to interact with the service provider, the responsibility has transferred too and transparency with users will be key to avoid any regulatory difficulties.
Data and trust are the currencies of future embedded finance
When discussing their predictions for the future, two common threads were data and trust. Irfan felt large banks would shift from being trusted parties holding wealth to trusted parties holding data. Banks have continued to hold strong brand equity with consumers and already have the compliance processes in place. Iana disagreed, feeling data and technology would lead to embedded finance ‘winners’ and large banks are failing to improve technology in line with the market.
A question was raised about Big Tech’s involvement in embedded finance, given a lot of progress is being made in the background and consumers are using embedded finance through these companies without necessarily realising. Irfan divided embedded finance into regulated and unregulated products and predicted banks will continue to dominate the regulated space while Big Tech monopolises the unregulated space. While Meta may have more data on users than HSBC, the Big Tech companies are unlikely to be allowed by regulators or interested in competing in the same space as incumbents.
The insights from all speakers were unique and presented some new questions about embedded finance that the industry must answer. Follow our LinkedIn page to hear about future events.