The 5 most important steps to developing a successful embedded bank experience

As a bank, your customers’ expectations are shifting and they’re demanding integrated experiences. Brett King, one of the world’s best-known influencers in the financial sector, stated that friction is the single most disruptive force in banking. That is to say, financial institutions that fail to integrate banking capabilities into their client’s everyday lives, will slowly but surely fade into the background. Even without this pressure bearing down on the shoulders of banking executives, it is very clear that client expectations are rapidly shifting. A friction-free world where everything is integrated and accessible from the mobile device of our choosing is no longer an idea from the future.

Even the world’s largest banks have been struggling to keep up. Conventional banks are marble monuments of conservatism and stability – the converse of agility and innovation. Although banks have attempted to remain relevant in the digital age by creating online banking and clumsy mobile applications, they have rapidly matured and so too has their approach. The objective is no longer to simply to target a new generation of customers. Instead, banks are looking to deliver services that reflect the best of the web to their entire customer base. Most notably to their commercial banking customers in the form of embedded banking services.

Embedded banking makes it possible for people to complete financial transactions within the applications and platforms they rely on to run their businesses. Put simply,, commercial banking customers can access core services and take advantage of new products without having to move back and forth between browsers and devices. It is a capability that eradicates the main source of friction that afflicts conventional commercial banking relationships.

The benefits for banks that get it right are extensive. Most importantly for the bank, embedded banking makes their services more sticky. It also increases adoption which improves loyalty and reduces customer churn. The ability to complete banking transactions within native business applications also boosts customer satisfaction and NPS (net promoter) scores; a key metric for most banking executives. In addition, embedded banking provides more cross-sell and upsell opportunities and allows banks to leverage more detailed usage data to enhance existing products and inform new ones.
As financial services and digital innovation work together to catch-up with consumers evolving expectations, embedded banking services are positioned to help banks make the leap. However, banking leaders looking to be part of the early majority need to start planning now. To aid in that effort, we’ve outlined below 5 key areas to focus on first for the successful development and delivery of an embedded banking experience:

  1. Know What ERP Systems Your Clients Use:
    Embedded banking means delivering banking services within a customer’s existing suite of business tools. This requires a deep understanding of the most popular ERP systems. We make it possible for banking clients to manage liquidity, conduct and reconcile payables, and consolidate receivables from a bank- branded section within Netsuite, Microsoft Dynamics, Quickbooks, or SAP.
  2. Know what market segment you’re targeting and what bank products they use:
    It is critical to understand your target customers; what market segment and verticals will you target? What bank products do they use? Is there anywhere where they are underserved? Are there areas where your products are under-utilized?
  3. Decide how you will you support client success:
    Customer-centricity is actually a relatively new concept for financial services. Traditional products were created for profitability, not to alleviate a customer problem. Bankers will need to turn their innovation models inside out. That means a deeper understanding of how their customers can use their products in context. Embedded banking is an innovative service, not a silver bullet.
  4. Decide whether you want to (and are able to) support a new channel internally or need to partner with a FinTech:
    Unlike traditional product extensions and promotions, embedded banking requires new infrastructure and support models. That means breaking down and analyzing existing operational models to see if they are robust enough to support this new channel.
  5. Determine whether your trust, onboarding and authorization models ready
    Related to infrastructure requirements, banking executives need to first figure out if their existing trust, onboarding and authorization models meet data privacy and security requirements. Choosing the right technology partner is a large part of that. At FISPAN, we are SOC 2 Type 2 compliant, resilient, available and performant.

Aside from those five core areas, there are also traditional considerations involved in developing a go-to-market strategy. Those include, but are not limited to, creating a clear business model and business case, a structured plan for customer success and support and identifying objectives that feed into key business metrics.

The concept of embedded banking is not new, however the ability for banks to deliver against it is. While capabilities are rapidly advancing, the potential is enormous. In the near term, embedded banking will evolve from the ability to surface passive services into sophisticated platforms powered by machine learning and artificial intelligence. Automated, contextual banking systems with the ability to make forward thinking strategic recommendations will not only reduce the friction of traditional banking but usher in an entirely new era of financial services.