Embedded finance has become the buzzword of the payments industry as industry partnerships fuel greater integration of financial service into non-financial apps or websites.
Much like the conversations around open banking in Canada, embedded finance enables financial services on the customer’s terms and allows non-financial businesses to build better, more immersive experiences that drive revenue and loyalty. A push for more partnerships across banks, financial service providers and fintechs have created more dynamic conversations about what the future of the embedded finance market could look like.
Prepaid’s ability to innovate quickly, thanks in part to low regulatory hurdles, has cemented its place at the forefront of embedded finance. Prepaid companies already have the payments, regulatory, operation and customer service expertise to enable embedded finance. Many have modernized their technology stack to offer faster, more seamless integrations between non-financial brands and the financial services they need to complement their customer experience.
This topic will be one of the featured conversations at the CPPO’s 2021 Spring Symposium on June 9, where top payments innovators will take a look at how embedded finance allows non-financial brands to offer financial services. Panelists include representatives from Netspend, Paypal, Shopify and Mastercard. Learn more here.
Prepaid’s Tech Stack was Built for Embedded Finance Solutions
Prepaid’s tech stack provides a rich and nimble platform for advancement across financial services. Consequently, it is providing financial institutions and fintech players, including challenger banks, a foundation to bring new products and services to market quickly with all the supporting regulatory understanding, market awareness and risk/security framework required for successful propositions.
Integrating banking and payment services into non-financial services or apps is also a key talking point in the open banking conversation in Canada. For embedded finance applications to scale across the Canadian payments ecosystem, there must be a greater appetite for partnerships across banks, financial service companies and fintechs. Prepaid solutions provide an easy path to digital payments innovation for companies looking to integrate embedded finance solutions quickly — while satisfying regulatory requirements.
The lines are blurring between who is and who is not a payments player; embedded finance allows non-financial brands to offer financial services through a number of payments partnerships. The seamless integration of these services can help bring financial services to more consumers as the barrier to entry is lowered when offered through more payment methods.
One example of prepaid technology supporting embedded finance solutions is the recent partnership between Mogo, a fintech company, and LendingClub Bank. This partnership was forged through Mogo’s payments platform, Carta. Carta’s modern card issuing platform is designed to expand partnerships across fintech and evolve its own role in the embedded finance market. Mogo, which offers a digital spending account with a prepaid card, made its acquisition of Carta last year to deepen its footprint in the digital payments market — including a push for more embedded finance solutions.
Prepaid and the Evolution of the Embedded Finance Market
Advancements across the payments landscape have allowed the prepaid market to become deeply embedded as a digital banking tool to consumers and businesses looking for digital payment alternatives that don’t involve linking a credit card. For example, issuers are investing more in prepaid, sensing opportunities in prepaid’s ability to transform digital payments for both consumers and businesses, particularly in the growing challenger bank sector.
Virtual card platforms are an example of how prepaid presents embedded finance opportunities. Industry collaborations between fintechs, banks and non-financial service players can help bring innovative solutions to wider audiences faster, and more secure than ever before.
The popularity of embedded finance solutions is also igniting conversations around payments modernization in Canada. Many Canadian consumers have bank accounts but lack methods to pay online for goods and services. The pandemic has put pressure on the industry to deliver affordable, accessible digital payment solutions. Embedded finance solutions aim to remove these barriers to allow consumers to access financial solutions through non-financial businesses.
Payments Canada has an advisory task force to support this agenda. The task force will look toward the U.K. for guidance and bringing together voices from both the private and public sectors to establish a united front for “moving money and data faster.” Embedded finance solutions help financial services companies and businesses achieve common goals: drive customers loyalty through frictionless, ubiquitous payments solutions that seamlessly embed payments into consumer’s everyday lives.
Embedded wallets that leverage prepaid solutions present immense opportunities for a number of sectors — including retail, insurance, healthcare and education payments. The ability to embed prepaid payment solutions through digital payments apps and virtual prepaid cards is changing the way Canadians spend, save and move their money. Greater partnerships across the Canadian payments ecosystem will create even more use cases to allow non-financial businesses to offer personalized customer payment experiences through more innovative, integrated financial services.