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Last year, Mastercard and technology platform provider Fabric announced an expanded strategic partnership to develop integrated financing solutions for businesses across Europe. The deal will enable companies to integrate financial services directly into their products through application protocol interfaces (APIs), allowing them to offer payment, banking and insurance services without having to build their own financial infrastructure.
The use cases for embedded finance enabled by APIs are nearly endless. For example, they can enable healthcare providers to offer out-of-pocket payment options to patients directly on the provider’s website. Retail businesses of almost any type can offer loans to consumers without them having to leave the original website where they are shopping, making the customer journey easier and increasing the likelihood of future purchases.
Until recently, limited offerings of economically attractive APIs — the necessary “pipes” that securely share personal financial data between banks and third-party developers — governed market growth. Now, thanks to continued API innovation, financial leaders have gained confidence in their ability to support automation and generate scalability with new integrated finance offerings. This, in turn, has encouraged the emergence of third-party banking-as-a-service companies that use application programming interfaces (APIs) to integrate financial services into the customer experience and enable companies to target a broader range of demographics, including the so-called “unbanked and unbanked.” They suffer from a lack of banking services.” “.
Coincidentally, the worldwide spread of smartphones has been a major driver of the development of the embedded finance market. Statista expects the number of smartphone users globally to grow continuously between 2024 and 2029, with an additional 1.5 billion (31%) users. The continued growth in mobile wallets and the Unified Payments Interface (UPI) developed by the National Payments Corporation of India, which has over 300 million active users, are further indicators of the blended finance trend. As an industry sector, it is now expected to rise significantly in the coming years, with the market accounting for revenues of $384.8 billion by 2029 – a growth rate of approximately 17 times from the $22.5 billion generated in 2020.
Included insurance
To see embedded finance in practice, look no further than Wysh, a digital-first life insurance company that enables companies to embed financial protection into existing applications and product offerings. Wysh offers a no-cost life insurance policy that can be integrated into a variety of financial products, such as savings accounts, and is particularly suitable for customers with little or no coverage. Banking institutions consider it a way to attract and retain deposits in a highly competitive environment.
Alex Matjanec, CEO of Wysh, says recent developments in secure APIs for sharing financial data have enabled his company to implement rapid product integrations with new partners. In the case of Wysh’s recently formed alliance with family financial planning site UNest, the company offers a built-in life insurance policy as a free benefit tied to customers’ savings account balances. “We are able to provide a transparent experience for consumers to automatically obtain coverage as a feature built into a savings account, for example,” says Matjanek. Fast company.
From a customer journey perspective, Wysh’s offering overcomes consumers’ common misconception about the complexity of obtaining life insurance, making the process nearly frictionless instead. LIMRA’s 2023 Insurance Barometer study found that only about half of Americans own a life insurance policy, while 41% of insured and uninsured individuals say they do not have adequate coverage. A majority of Millennials (66%) say they would not buy life insurance because it is too expensive, while 29% say they are overwhelmed by the perceived complexity of obtaining coverage.
“There is a lot of research that shows that people think that getting life insurance is too complicated, and at the same time, financial institutions feel that adding a layer of protection to their products is also too complicated, but it doesn’t have to be that way. Matjanik says.
Great forecast
After reaching 12 million customers in the third quarter of 2023 — an increase of more than 100% from the previous year — blended finance company MoneyLion said that by 2025 it expects its products to be in the hands of about 12% of Americans. The company operates a financial products search engine, application programming interface (API), and embedded financial platform that delivers personalized recommendations through multiple touchpoints with customers, a significant portion of whom have less-than-ideal credit scores.
MoneyLion is also seeing significant growth in its enterprise B2B offering, which contributed approximately 35% of the company’s total revenue in the first half of 2023. In the third quarter, the company reported a 24% increase in revenue from the previous year to more than $110 million, with a list of It includes more than 1,100 business partners. “Since we are integrated into many websites, the cost of generating this revenue is much lower,” MoneyLion co-founder and CEO Dee Chaubey said recently. Financial brand.
Another company making a similar shift toward blended B2B financing offerings, Neo Financial, launched in 2019 with a mission to provide new types of banking products to consumers. As the company develops, it works more and more with companies to provide them with integrated financial solutions. Neo Financial recently announced a new rewards and cash back debit card for consumers, as well as a partnership with Intuit TurboTax to offer loan advances secured by personal tax returns. The deal with Inuit is a blended financing product, with the loan being provided by Neo Financial through its banking partners.
Array, another provider of an integrated financial innovation platform used by fintech companies, financial institutions and digital brands, recently announced a multi-year agreement with FICO to provide credit scores and related data to millions of consumers. By providing Array access to their credit scores, the service helps consumers better understand and manage their financial health, while building stronger relationships with financial service providers as a result.
Favorable regulations
The current regulatory winds in Washington, D.C., appear to favor continued progress in blended financial innovation, encourage competition among financial institutions, and give consumers more freedom and access to new services.
In October of 2023, the Consumer Financial Protection Bureau (CFPB) announced a proposed rule that would require U.S. financial companies that offer checking accounts, prepaid cards, credit cards, and digital wallets to give consumers access to their personal financial data for free. Can be shared with other providers. The proposed rule would expand consumers’ access to their financial data across a wide range of financial institutions, ensure the privacy and data security of consumers, and drive greater efficiency and reliability of data access across the industry to reduce costs, according to the CFPB. (It is difficult to predict if or when the ruling will go into effect. The CFPB must conduct a detailed review of all public comments submitted and then make a final decision.)
“The CFPB’s proposed rule represents an exciting shift in the financial services landscape in North America,” says Laurent Van Heuvel, senior vice president of financial services and open banking for North America at Axway, a provider of enterprise data integration services. “This is an opportunity for financial institutions to eliminate customer data sharing via insecure screen scraping and leverage first-mover advantage.”
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