Once an afterthought for traditional banks, customer experience is now a touchstone for these legacy providers of financial services. With their monopoly eroded by the emergence of tech-driven financial companies (fintechs) in the wake of the financial crisis, they can no longer take customer retention for granted – forcing them to rethink their outdated financial services. Empowered by choice and innovation, the modern consumer demands access to customer-centric services that focus on providing a positive experience at the point of sale.

Spearheading this disruption of the antiquated brick-and-mortar banking model is embedded finance: the seamless integration of innovative financial services or tools within the products or services of a non-financial company. This alternative model is allowing banks to bridge the gap between customer expectations around efficiency, speed and personalisation and what their narrow legacy tech can deliver.

Enhancing convenience and accessibility

A product of the fintech movement, embedded finance providers are breaking down entrenched barriers to financial inclusion that previously obstructed consumers’ – both individuals and businesses – access to vital services. This subversive approach allows them to give consumers exactly what they want: frictionless financial services that mirror the highly personal and streamlined experiences they enjoy elsewhere online.

With the embedded finance journey seamlessly integrated into the non-financial companies’ user interface, customers can bypass clunky traditional structures that rely on legacy third parties, multiple forms, and manual processes. The result is a streamlined customer experience that saves them time and effort while cultivating a sense of security and reliability.

Personalised financial offerings

Back when banks held a monopoly over the financial services space, a handful of providers offered the same generic services under different brands. No longer fettered to these narrow services, consumers are demanding bespoke experiences beyond physical branches. Embedded finance is empowering banks to develop a deep understanding of each customer’s requirements and deliver a set of tailored digital experiences that satisfy them – and it’s being powered by AI.

The modern consumer typically chooses to engage with brands that acknowledge and remember them. This relies on the aggregation and analysis of data to deliver personalised services that are relevant to their requirements and preferences. Embedded finance augments conventional data sources based on demographics and age with AI-powered personalisation. Advanced algorithms possess the power to conduct real-time analysis of vast datasets and recommend tailored products and services based on their browsing/buying preferences.

This marks an inflection point for banks, who are breathing new life into their customer experience by swapping a narrow set of services for the ability to anticipate and give them what they want at the right time, through the right channels.

Streamlining financial transactions

Embedded finance allows banks to simplify the banking process by replacing time-consuming and inefficient manual interactions with a seamless online user experience. Customers can access financial services directly within the platforms they already use, eliminating the need to navigate multiple third-party apps or websites. For example, some e-commerce platforms offer embedded payment processing, allowing customers to make purchases without being redirected to external payment gateways – reducing friction and enhancing the overall user experience.

Another example is embedded lending, which expedites the loan application and assessment processes by leveraging advanced algorithms – with the application process conducted online with a few clicks and a decision made within minutes.

Improving financial education and empowerment

Financial literacy – the knowledge and skills needed to make important financial decisions – is a key attribute for both individual and business customers when applying for products. Embedded finance’s innate ability to streamline traditionally convoluted and confusing financial services provides consumers with transparency and clarity about the products available to them.

Consumers are exposed to financial concepts in a more accessible and intuitive manner when these services are integrated into everyday products. By eliminating barriers to entry and simplifying the user experience, they gain a better understanding of financial management and can make more informed financial decisions.

Embedded finance can also provide educational content directly within financial applications or platforms. Users can access articles, videos, tutorials, and other resources that explain key financial concepts, terms, and strategies. By integrating financial education into everyday activities, people can learn at their own pace and develop a deeper understanding of personal or business finance.

Building trust and security

As financial services become more integrated into everyday platforms, the risk of fraudulent activities increases amid an ever-expanding and evolving cyber-attack surface. Any concerns around trust and security in the digital banking space are being addressed by a compelling weapon in the embedded finance armoury: artificial intelligence (AI).

AI-powered fraud detection and prevention tools conduct real-time analysis of broad and diverse customer data sets and present their findings expeditiously. When fraud is detected, AI models can automatically reject transactions or flag and rate them for further investigation.

Case studies and success stories

Liberis has partnered with Barclaycard to offer their small business customers access to personalised revenue-based finance. Called Barclaycard Business Cash Advance, this elevated customer experience allows these organisations to access finance based on their overall business revenue rather than historic credit scores – a frictionless service that unlocks the funding they need to grow.

Liberis advances a sum of money to eligible merchants on the agreement that they pay the sum plus a pre-agreed fee. This alternative finance product offers fixed-cost financing with flexible payment terms – allowing business owners to access the funds they need when they’re needed.

Future Trends and innovations

For the customer experience to meet shifting user expectations around efficiency, speed and personalisation, the embedded finance ecosystem must be agile enough to shift with them. By harnessing the dynamic power of AI to constantly learn and adjust based on vast sets of transactional and operational data, embedded finance platforms are creating user experiences that are increasingly intuitive, natural, and engaging – a perpetual evolution that has the customer at its core. Banks that leverage this agility unshackle themselves from their rigid traditional services that restrict customers to the same turgid experiences.

Conclusion

Banks that fail to recognise the pivotal role customer experience plays in building trust and loyalty in the modern financial landscape will remain stuck in the past – a world where customers were taken for granted. Those that are prepared to evolve in this increasingly saturated market by respecting the contemporary consumers mounting demand for efficiency, speed and personalisation will meet their expectations during every interaction – and improve retention rates.

By collaborating with an embedded finance platform, banks can provide a seamless and convenient online journey that bypasses multiple third-party apps or websites. Once a pipe dream for customers amid unyielding rigidity in the banking model, this streamlined experience is appealing to their appetite for customer-centric services – heightening their satisfaction and engagement.