Knowing how embedded finance projects are initiated, and why, can help you build better products and services
How many business leaders do you think wake up in the morning and decide they need an embedded finance solution? I’d say it’s probably around… none.
When I talk to business leaders, they aren’t looking to implement something for the sake of it. They do, however, always look to provide the best possible product or service to their customers. They are constantly analysing and adapting, seeing where they can make improvements and evaluating the infrastructure they are working with, to ensure it’s fit for purpose.
This is usually where an embedded finance project begins. A Head of Payments comes to us because the tools they’re using aren’t delivering what they need. Embedded finance gives them a shedload of new tools to work with.
Let’s look at payment reconciliation as one example. Any business that needs to route transactions between multiple entities (investment platforms, marketplaces, prepaid travel cards) will also need to reconcile those payments.
A cryptocurrency platform, for example, is accepting payments from their users via bank transfer. Their customers must include some form of reference information, then their Ops team have to reconcile these payments manually. It’s time consuming, with plenty of chances for mistakes to occur and payments to go missing.
It’s at this point that a Head of Payments will start to explore alternative payment infrastructure, like embedded finance. By embedding financial infrastructure like accounts into their ecosystem, the platform can assign each customer a virtual iban. This means that when the customer makes a payment they are sending money to a virtual account that is unique to them. No more referencing information, manual processing or missing payments.
But embedded payments infrastructure can go even further. By employing services like Open Banking, customers can make these bank transfers directly through the cryptocurrency platform. Using a Payment Initiation Service, a transfer can take place fully within the platform’s ecosystem, making the experience faster and simpler for the customers.
This is how embedded finance comes about - not as a thought up idea, but the best solution to ongoing challenges and pain points.
Now, the conversations start. Businesses come to us with a problem that needs solving or an improvement to be made. Making that happen is where I come in.
It’s my job to look at the financial services our clients would most benefit from, both now and in the future, and make sure we can support that. This involves working closely with our banking partners so our clients can access faster, more innovative services in more places around the world.
Those payment and banking partnerships aren’t forged overnight. Nor should they be. When working with peoples’ money there’s a lot of regulation involved to rightly make sure everyone stays protected. It’s not the kind of thing you can just be reactive to, so we’re constantly looking at where we can build out our offering further and deliver the services our clients need.
The obvious first step is ensuring they can provide exactly what you need right now, but after that, start thinking about the future. Do they have evidence they can provide those services at scale if your business grows rapidly? Are they able to provide the ideas you have on your roadmap, or will you have to switch your provider a few years down the line?
While not essential, if they have a track record with other businesses in your industry, that can give you confidence that they are equipped to handle your needs.
In my experience, the most comprehensive approach is the most useful. That’s why we’re constantly looking at what else we can build, and will continue to do so for the foreseeable future.
Welcome to the first day of the rest of your (embedded finance) life.
Manual payment reconciliation is giving your Ops team nightmares. Virtual IBANs could offer a better way.
Simplifying reconciliation and bookkeeping, the automated sweep is an OpenPayd feature built to make life easier.