Pathway to the open economy model: how the convergence of payments and open banking is leading to new retail business models
In recent years the concept of Embedded Finance has been vividly brought to life across financial and B2B services and has entered the mainstream by transforming the B2C services that we use every day. Be it transactions, wallets, insurance, loans, consumer finance, or investing, non-financial companies can now let their customers access complex financial services from a single point without redirecting the customer to third-party destinations or back to banks.
It is safe to say we are living in the era of Embedded Finance. This relationship has already kick-started a revolution in end-customer interactions with businesses and banks by providing them with new services that are fully digitally integrated into everyday life, and in retail, the convergence of payments and open banking is leading to new retail business models.
The Open Platform model promoted by Fabrick is the key approach that makes these advances possible, reducing innovation costs and time to market for all the actors involved. Embedded finance has helped to streamline financial services for consumers, making it easier to access the B2C services they need at the very point and place they’re needed.
The rise of embedded finance
From concept to reality, Embedded Finance has advanced rapidly to become a growing market that is estimated to generate revenues of $230 billion globally with a CAGR of 59% between 2020 and 2025.
An early mover to this growth sector’s possibilities, four years ago, Fabrick launched its ‘open platform’ approach at Money20/20 in 2018 when the Fabrick Open Finance platform was first presented to the market in anticipation of the new European regulation PSD2 that came in 2019. Sharing the pioneering vision for its open platform project, with the mission of fostering collaboration and simplifying innovation for banks, fintechs, and corporations, the Fabrick platform natively combined Open Payments and Open Banking services and started the Fabrick evolution toward the new paradigm of open and embedded finance.
Fabrick’s Embedded Finance solutions, which are already in use today, reflect this evolution by providing financial and non-financial actors with value-added use cases, powered by the ability of the platform to aggregate and integrate data from different sources and different players across industries.
The Fabrick Open Platform model is an approach and a way of doing things that is at the heart of the revolution and while Open Finance and open platform are now widely recognised concepts in the market: what makes the difference is the ability to execute concrete value-add projects.
Two striking examples that Fabrick has pioneered in the retail sector are Payment and Collection Engine (PACE) and Payment Orchestra™. PACE is a digital payment management platform that offers customers, manufacturers, or retailers the broadest possible set of electronic payment acceptance tools. Thanks to centralised management, the platform simplifies and automates the payment process and its reconciliation with corporate systems. Payment Orchestra™ is a global payment gateway aggregator, which optimises the payment infrastructure by orchestrating different payments on a single platform. Both solutions, PACE and Payment Orchestra™, are realised in collaboration with Axerve, a Fabrick company specialising in payment acceptance across all channels, both physical and digital.
Based on Fabrick’s ability to interpret market changes and its operational management, UnipolPay has chosen to work with Fabrick on the development of its innovative payment solutions, to bring concrete benefits to the end customer and to strengthen the customer relationship through a holistic offer that adds value.
Demand for integrated services & pathway to the open economy model
These services are in reality a starting point for a new type of customer journey. We can address future use cases using this same model as this open approach is the foundation not just of the changes we are seeing today, but also of the open economy model of tomorrow.
These approaches both leverage data in order to improve value for end customers. By integrating banking into non-financial products companies are able to unlock invaluable data and insights into their customers’ financial habits and therefore provide them with better experiences; an approach to data that will drive future trends and meet consumer demand for increasingly integrated services.
Open data is set to emerge as the richer extension of Open and Embedded Finance and will consider how consumer data can be used to develop new solutions, products, and services that cut across industries from financial services to energy, telecoms, health, and beyond to support customers in many aspects of their life. Embedded finance is therefore paving the way for all industries towards an Open Economy model.