Conor Colleary, Group VP in Financial Services at Oracle
Embedded finance has sent customer expectations soaring. Integrating a bank’s services directly into applications that their clients use is fast becoming second nature, with products like mobile wallets now so commonplace that services like Transport for London no longer require payment authentication.
As embedded finance disrupts the market, it is affecting the value of existing products and services, especially in corporate banking. By 2026, its transaction value will more than double to $7 trillion in the US alone. Considering this simply as a growth area within banking is an understatement – it is a catalyst for the full transformation of once-stagnant operations and services.
Now, banks are setting their sights on the opportunities that embedded finance holds for their corporate clients. While corporates represent one of the most profitable segments in banking, they’ve consistently lagged when it comes to investing in innovation, often held back by manual processes, disconnected systems, and siloed data. By investing in a digital ecosystem, banks can deliver interconnected services and grasp the embedded finance opportunity, able to deepen the value of their corporate relationships and create a new class of delivery channels.
Seamless services end-to-end
Embedded finance is all about making connections. Fragmented systems and disparate databases slow down progress, with banking portals often disconnected from enterprise resource planning (ERP) systems. From the onboarding process to reconciling different views, tedious navigation becomes a necessary evil to find the simplest of answers. As highly personalised products and services become standard, large banks can struggle to keep up with evolving expectations.
With embedded finance, banks have an opportunity to leverage real-time transaction insights to power connected journeys. Yet, this is only possible when they bring data together. With the visibility of all client data in a single platform, banks can create greater transparency, reduce errors, and minimise time-consuming administrative tasks. Banks can also harness historical and real-time transaction data, crafting unique new financial offerings and closely connected customer journeys that fortify client relationships.
Level up liquidity management
As well as improving the customer experience, embedded finance enables corporates to understand the risk on their balance sheet and helps position banks to better manage risk for customers. Multinational companies often keep several bank accounts, incurring higher expense reconciliation and operational costs. This fragmentation breeds ineffective working capital management, difficulties forecasting, and a lack of real-time view of cash positions. This is especially difficult to contend with in the cost-of-living crisis, with banks contending with increased difficulty managing cash flow.
By connecting applications and data across the financial organisation, leaders can gain a rapid, clear picture of customer demands and capital reserves. With embedded finance solutions such as payments on behalf of (POBO) and collections on behalf of (COBO) programmes, corporates can easily assess their balance sheet risk, use real-time treasury to enhance liquidity management, and position themselves as better risk managers for their customers.
Pro-active, faster lending and payments
With the real-time, rapid nature of embedded finance, corporates can not only manage the risk associated with lending, but deliver loan services to clients in just days instead of months. Embedded finance empowers banks to help corporates succeed at every stage of the banking life cycle, from finding and securing consumers, to optimising capital and facilitating trade. For example, embedded finance gives banks access to financial information without the need to manually upload data to an online portal. It puts lending at the point of purchase, without the need to visit the bank or spend time filling in lengthy paperwork, with services like buy now, pay later (BNPL).
As for payments, corporates expect faster processing from banks to keep up with the speed and ease of personal banking. However, most banks still process payments in batches, hindering real-time views and lacking analytics capabilities to promptly address issues. This lack of visibility into underlying payment analytics, fees, and volumes makes it difficult for back-office staff to understand the source of errors and perform corrections. Moving to more intelligent payments enabled by embedded finance, can reduce the time and amount of cash held in transit and improve liquidity. With payments sent instantly through APIs and linked to accounts for supplier-level analytics, banks can offer greater operational efficiencies and increased client satisfaction.
Building the future of finance
Bringing artificial intelligence (AI) into the mix is the next step in embedded finance. By leveraging embedded finance data, banks can cross-sell banking services beyond treasury, provide new value propositions to corporates, and embrace new business models. Harnessing the mass of data that banks hold, and using AI to gain valuable insights from this, can help to increase customer safety and personalise their experience. Corporates can then predict customer transaction patterns, even analysing client data in real-time, to provide prompt, AI-powered, contextual offers to clients exactly when and where they need them.
As competition from agile challenger banks grows, embedded finance empowers incumbent financial institutions to reimagine their value propositions and support clients to succeed across every stage of the corporate banking lifecycle. Banks and their clients can foster powerful, profitable partnerships, capitalise on these new opportunities, and bring operations into the new age of finance.