: EMBEDDED FINANCE
During the first wave of fintech disruption, banks feared they would be condemned to irrelevance. Now, that’s very far from the case, says Finastra’s Angus Ross. A tidal wave of ever-improving digital technology is constantly transforming the way the world lives, works and plays. Spotting which of these digital horses to back is the challenge. But, as the hurdles get higher and the pace faster, global financial services solutions specialist Finastra is betting on one to make all the running.
to grow by more than 50 per cent annually over the next five years. And, while those with BaaS offerings have, so far, primarily focussed on retail banking services – which will continue to grow, the report said – considerably more, green-field opportunities lie in corporate and SME-specific products. Key takeaways from the report include:
Banking-as-a-service (BaaS) is bringing huge new opportunities to sectors far beyond banking by creating an ecosystem of providers, enablers and distributors. And it’s as an enabler that Finastra plans to lead the field and bring its 8,500 or so banking clients along for the ride. The company recently conducted a study of the BaaS market, expected to be worth $7trillion by 2030, and established the first BaaS ‘maturity index’ to assess where the juiciest opportunities for banks lie. Interviews with 50 senior executives and surveys with a further 1,600 – who could be providers or distributors of such services – showed that 85 per cent are already implementing BaaS solutions, or plan to do so within the next 12-18 months. It also revealed that the main participants in the BaaS ecosystem also want to increase their investments and partnerships as they expect the market
■ Buy now, pay later (BNPL) is poised to be as ubiquitous a service as e-wallets, adopted across every single sector (although with the highest usage among e-commerce and fintechs) over the next three to five years ■ Virtual ledgers will be much in demand among automotive and fintech users ■ There will be increasing demand for trade/supply chain finance from retail, technology, e-commerce and banking ■ There will be high demand for FX services across e-commerce, healthcare, manufacturing and automotive ■ Expect growth in working capital, trade finance and SME lending in the banking, healthcare and retail sectors in particular
8 FintechFinancePresents–
Some of those findings are supported by separate research by accounting giant Deloitte, which also predicts there will be more change in the auto financing
industry in the next decade than in the last 30 years with customers wanting flexible usage packages as the progressive connectivity of vehicles make new pay-as-you-use services possible. Manufacturers have also realised that they can earn more in future from the use of the vehicle over its lifecycle than from the one-off sale of a new car. Healthcare is another area where companies have a distinct opportunity to create viable embedded finance business models, according to Deloitte. Good health is increasingly considered a key component of the employee experience and companies are starting to assess links between the wellness of their workforce and the company’s financial performance. Financial institutions can, therefore, not only be an active participant in the evolving ecosystems but, in some cases, be the lead orchestrator if they are able to act fast and now, Deloitte concludes. That call for banks to speedily join the BaaS revolution is echoed by Angus Ross, Finastra’s chief revenue officer for BaaS. “It’s quite easy to identify what the opportunity and threat [for banks] is from embedded finance,” he says. “As a bank, you’ve got existing customers for whom it may be more relevant to do what they do with you today through a third-party interface or a channel that you don’t own, ffnews.com