Why integrated finance is not about finance



Financial services. For centuries, they were a birthright for banks only. Severe restrictions prevented others from offering them, making banks the only game in town. Get into integrated finance, and now any brand can offer financial services to their clients.

Chances are you’ve experienced it before – in food delivery, taxi services, or shopping apps. When your taxi app automatically pays for your ride or you buy multiple installments online, it’s part of a process called built-in financing.

While not new, the concept has taken off in recent years, with banks and tech companies looking for ways to create more convenient and personalized experiences for their customers.

A concept comes to fruition

In the early 2000s, an influx of start-ups entered the financial industry. These newcomers took banking services apart and upgraded them, making them more user-friendly – a phase known as “financial unbundling”. The banks have gone on the offensive. Until both sides realize that for the sake of their customers, they should cooperate rather than compete. Thus began the great “consolidation of finance”: reconstituting banking services. Only now they are not only found in banks, but also in other non-financial companies.

The advent of open banking has paved the way for these trends. The increased use of application programming interfaces, better known as APIs, has made it possible for companies to easily integrate financial services into their customer journeys to deliver richer propositions.

While these advances are more visible in payments, integrated finance is advancing in other areas such as insurance, lending, wealth management and stock trading. By 2030, the integrated finance market is expected to capture more than $ 7 trillion in value.

Who runs the world? Customers

As more people learn about digital services, brands should integrate financial services into their business models. Tesla, for example, has developed an in-house insurance program offering personalized coverage and a convenient monthly payment service to its customers. The Shopify e-commerce platform has partnered with payment provider Stripe to enable consumers to open bank accounts directly on its platform.

It is not just retail customers who benefit from broader integrated services. Stripe Treasury works with Citigroup, Goldman Sachs, and other banks to provide online business banking services.

So where does that leave the banks?

In the wings

Banks are well positioned to grow their market share – they are the primary licensees in a highly regulated environment and they can extend existing platform strategies. The question is: will the winning approach be to get closer to and meet customer needs better than anyone, or make it easier for others to meet their customers’ needs?

One thing is certain: we live in an age where people may not know who provides a financial service. They also don’t care what happens “behind the scenes”. What interests people are more practical and personalized experiences, which is exactly the point of integrated finance.

The approach of bringing together customers’ needs is attractive for banks: either by developing the services themselves, or by connecting partners to the bank’s digital platform. Especially since banks have a very strong card to play: their digital platforms have enormous traffic. Many people check their banking app several times a week. How many departments can claim that …



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