Embedded Finance and Banking as a Service
Simply defined, embedded finance helps integrate third party financial services into a company’s offering. It has been helping non-banks to boost customer experience by offering integrated services like payments, savings accounts, investments, digital wallets and more.
From the Starbucks app that you use to the Uber rides you take, embedded finance is deeply ‘embedded’ in our daily lives.
Banking as a Service (BaaS) is a similar idea and a core category within embedded finance. It is a model that allows non-banks and virtual banks to offer banking services to their customers without having to build the services themselves.
This connects companies to the third parties banking system with the help of APIs and webhooks, and uses it to power its bank or EMI (E-Money Institution).
Powering a new generation of neobanks
BaaS has led to the rise of a new generation of neobanks, banks built on an external stack, rather than building their own. Whilst the first wave of neobanks like Monzo and Starling had to build their own banks, from scratch, Baas services have enabled newer neobanks to access tools and rely on the technology of an integrated provider, and focus on their USP or User Experience.
Why Embedded Finance and Banking as a Service matter
- Embedded finance uses BaaS and APIs to integrate financial services into a company’s ecosystem. Developing a banking-based embedded finance offering is only possible with a BaaS infrastructure.
- Embedded finance focuses on customer-centric solutions to eliminate the need for the client to leave the platform to pay or invest. The service concerns itself with singular transactions and strives to keep the customer connected to the platform until the end of the purchase.
With rapid development in fintech and changing customer expectations, BaaS and embedded financial products have essential roles to play.
To optimise customer experience, companies must stay on top of emerging technologies but need to remain agile and efficient whilst doing so.
With the help of WealthKernel's industry-leading APIs, businesses can seamlessly integrate investment products and services into existing offerings or build new propositions entirely on an investing stack delivered via API.
Check out our recent piece on 3 ways embedded investing will boost your business.