Fabrick Insights

Open Finance, Key Concepts

- Scenario

Fabrick: from Open Banking to Embedded Finance and the new frontier of customer experience

The world of financial services is undergoing rapid change. Open banking was the first leg of the financial transformation journey. Now we are making great strides towards something more holistic: banking-as-a-service, embedded finance and Open Finance are the key concepts that are accelerating our journey towards innovation and a financial ecosystem that is more connected and better positioned to deliver the services customers want.

Payments and embedded finance

Payments are often the first step towards embedded finance since capturing rich customer data provides tools to better understand and serve the end customer. Data is constantly being produced by users, businesses and financial institutions operating on platforms like Fabrick’s, both on the consumer and producer side.

At Fabrick we want to establish a new way of banking that is open, modular and data-driven, and for Fabrick Open Finance this approach is at its heart. The proposed solution allows all players to benefit from the ability of banks, enterprises and the rest of the ecosystem to be able to communicate and share. The ultimate goal is to be able to focus on the needs of the users, in fact the key question we always ask ourselves is “what do customers want and how do we find this out?”

Embedded finance: focus on customer needs

If you consider that the customer requires a simple, holistic, immediate and very convenient experience, then undoubtedly the best way to satisfy them is to focus on the combination of services, for example, combining current account payments with other types of services. This is a start of embedded finance.

Today, Buy Now Pay Later or BNPL is becoming very popular and has been made possible precisely by customising services based on building blocks and supplementing them with a series of additional services designed to meet customers’ needs.

The case of BNPLs is very interesting in understanding the value and benefits of embedded finance because it shows how payments and finance can really be combined at the point of sale, making this truly relevant to end customers.

Unexpected” solutions such as BNPL demonstrate how embedded finance can offer many opportunities that are largely undiscovered. These types of services also have many use cases, especially in the B2B space. For example, in reconciliation and supply chain finance, some new banks are working to simplify the cash flow cycle for companies. The role of Open Finance is to create conditions that allow the combination of services.

Embedded finance will create the best possible customer experience, and therefore has benefits in terms of customer retention.

Embedded finance, an opportunity for post-pandemic recovery

We have seen the innovation of a decade concentrated in a single year in terms of customer adoption of e-commerce on the one hand, and banking and digital banking on the other. In the last 18 months, the pandemic has led to a real increase in demand and acceptance of digital banking. This, combined with more innovation-friendly regulations and increased investment by companies and investors, has further accelerated the transformation of the banking sector.

The key point to consider when assessing the lasting legacy of the pandemic and who will emerge as the dominant player in the banking industry of the future, is the last mile – the customer experience.

With embedded finance in the near future there is an opportunity for fintechs and even Big Tech to provide exceptional end-user experiences alongside the incumbents. Combining banking products with the features of fintechs, neobanks or new players is a great way to support an institution’s ability to deliver exceptional customer experiences. Again, the way to combine these types of services based on platform APIs, not banking services, is by intelligently using data across payments and across relationships.

This is one of the reasons why payments are so important – payments are equivalent to data. Data is the best way to understand and anticipate customer behaviour and future behaviour for savings or credit needs. This is a key step in determining what customers want and providing a great service.

If we look at the pandemic for example, over the last 18 months data shows that many people have been able to increase their savings and become investors for the first time with a high percentage opting for small or even micro investments.

 If you have data, you can understand trends and behaviours and create more tailored services, for example digital wealth management tools in this case.

In the future we will see synergies and collaborations based on understanding data, combining payments, banking and other types of non-banking services. This will provide the best experience for customers, and we will achieve this through an embedded finance ecosystem.

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