By Eduardo Martinez Garcia, CEO and Co-Founder, Toqio
In the ever-changing world of financial services, corporate embedded finance is due to take centre stage in 2024. This dynamic concept is poised to undergo steady and significant transformation over the next few years, with corporate embedded finance being a game-changer for the financial sector.
I’m sharing below some of the trends we’re expected to see throughout the new year within the fintech and embedded finance spaces.
The continued growth of embedded finance
Embedded finance refers to the integration of financial services into non-financial business processes. The concept has been around for some time in digital consumer products. Many apps offer the ability to pay by credit card, on-the-spot lending, buy-now/pay-later (BNPL), and a variety of other features. Embedded finance is inexorably making its way into the corporate ecosystem and is set to reshape the financial landscape completely.
Everything digital seems to move at breakneck speed and this is about to ramp up in 2024. Corporate embedded finance platforms will play a key role in this growth, as they enable businesses to embed financial services into their offerings, quickly and easily.
All the reports published on the topic thus far have said the same thing: the success of embedded finance in the consumer space will carry over into the B2B arena, and be worth trillions.
Regulation in fintech will increase
As the fintech industry continues to grow, regulators are taking a closer look at it. This has led to increased regulation of the industry in recent years, and this trend is expected to continue. A lot of this has to do with the missteps of several financial service providers over the last couple of years. Embedded finance platforms will need to comply with these new regulations to ensure that nobody can take advantage of the great tools that are being produced.
We’ll witness an extended adoption of emerging technologies
Several emerging technologies, including artificial intelligence (AI) and machine learning (ML), will slowly make their way into the embedded finance space throughout 2024. We can expect to see increased adoption of these technologies by corporate embedded finance platforms and other fintech companies.
Tentative steps have already been made, but the serious consequences of issues arising from implementing these sorts of technologies have made those integrating them trepidatious. Both AI and ML are yet to be seen in corporate embedded finance. That’s mainly because integration, especially concerning lending, will be all about data collection and how to analyze the information extracted. Those two technologies, when linked to data science, will therefore be key differentiators in the future.
Financial inclusion will experience a boost – and so will corporate financial offerings
Financial inclusion has the primary goal of making financial services accessible and affordable to everyone. In the upcoming year, we can expect to see corporate embedded finance platforms focus more on the topic. This will involve developing new products and services that are specifically designed to reach the people who need them most.
More specific to the business sphere, “affordability” will become a heavy focus for brands to increase customer loyalty in both the B2B and B2C spaces. Brands will seek to offer customers and partners more financial product options when banks will not or cannot engage, such as turning down a loan based on traditional scoring methodologies or opening up lines of credit in light of restricted cash flow.
The financial landscape is going to get terraformed
Incumbent banks have demonstrated their staying power and adaptability time and time again, mostly due to being able to leverage their size and relative dependability. Banks are finally recognizing the need to adapt to changing customer expectations and digital transformation, especially as embedded finance matures and larger corporations embrace the concept.
In a very real sense, large companies are becoming the new disruptors. Banks have started scaling back their innovation because of market speculation and the spectre of possible collapse. Competition will become even more significant as the nature of a disruptor changes from a fintech to an empowered corporate entity.
The future of core banking is likely to strike a balance between fintech-driven companies and incumbents. While large financial institutions will endure, their role is evolving. Their strengths are assessment, management, and specialized services. We’re already seeing them pivot toward analyzing data from a multitude of sources, diving into data lakes to provide genuinely useful risk assessments.
Throughout 2024 we’re going to see a conscious and guided re-creation of the finance sector, a full terraforming of the terrain to create something that flourishes, with incumbents, fintechs, and companies all seeking to find their niches in the ecosystem. Corporate embedded finance will be a massive part of the upcoming shift.
Corporate embedded finance will get fairly close to becoming an industry norm
2024 will be the year of embedded finance technology. It’s the year we’ll see new tech and regulations change what we know about how the sector operates. It’s the year corporates will truly become banks, or at least bank-like. It’s the year smaller companies will look to trusted, larger partners for financial guidance and support. It’s the year that will end with corporations having recession-proofed their revenue streams through diversification. It’s the year where we’ll see corporates capturing new revenue by offering financial solutions throughout their operations.