An in-demand service for customers
Embedded banking is a rapidly growing opportunity for the banking sector, responding to the sweeping digitalization of the sector in recent years. These embedded services allow customers to take care of their financial needs in real-time by connecting the banking services that they need with the platforms and services that they are already using, reducing unnecessary disruptions to everyday life.
Beyond the value that embedded banking brings to digital sectors like ecommerce, the appeal of these services to end users is clear, offering customers instant gratification and easy access to key resources to enable everyday actions. Analysis by KPMG and EY show that as many as 50% of banking customers ask for these kinds of products tailored to their personal needs.
The challenge for banks – and the opportunity
Nevertheless, it remains a challenge for many banks to establish concrete offerings to meet customer demand on this topic, as they face the accelerating rise of fintech challengers stepping in to provide these services. Dedicated banking applications have already put access to banking services at customer fingertips, with top use cases like account balance checking, payment transfers, and bill payment – but these applications can present disruptions to the flows of everyday activities, requiring customers to use a separate platform to carry out their needed activities rather than seamlessly taking care of their financial needs in their existing interactions.
Third-party fintech solutions have been developed to capture this customer demand for a more seamless, embedded process, consequently shifting customer interactions away from banks themselves. In fact, recent analysis suggests that the fintech market is expected to reach an estimated value of USD$11.2 trillion in transaction value by 2024.
Collaborations enable successful embedded banking solutions
Scaleups have an important role to play in restoring the role of banks in these services, providing quick access to dedicated solutions that can strengthen the connections between banks and their customers. Rather than “working against” new solutions, banks have a significant opportunity to harness the innovation of scaleups to make embedded banking a reality for their customers without losing their place in the market, as discussed by Match-Maker Rudi Falat in a recent interview. With the popularity of embedded banking increasing every day and new solutions appearing to harness this growing market, banks cannot afford to wait to build their solutions in-house and risk a potentially years-long go-to-market timeline. The time is now to embrace the potential value of collaboration with scaleups to launch these services.
To give just one example of the valuable scaleup solutions available in this area today, Match-Maker Ventures portfolio scaleup PayKey specializes in embedded banking solutions for banks, offering both a groundbreaking Earned Wage Access (EWA) solution and a banking keyboard that enables customers to access banking services instantly in their daily interactions. Banks using the EWA solution provide on-demand access to earned income before payday, further increasing customer interactions with their respective banks. And the opportunity for these banks is huge, with a high demand among workers leading to significant revenue potential for banks – 79% of employees would switch to an employer who offers EWA according to Visa Direct.
In addition, banks using PayKey’s keyboard solution empower their customers to make important transactions without switching from their everyday apps to their banking apps, satisfying customers and solidifying the bank’s role in their everyday lives.
“Consumers’ financial behavior has evolved to the point where they expect banks to tailor financial services to their needs while being accessible when and where they need them. On the other hand, while banks face challenges in adapting to the new norm, they should leverage the trust consumers have in them, and find new ways to engage with their consumers at the point of need in a more responsible way that contributes to the individual financial well-being.”
PayKey CEO Sheila Kagan
PayKey enables banks and financial institutions to unlock their full potential and become key players in the Embedded Banking field with its unique embedded banking platform offering the Banking Keyboard and Earned Wage Access solutions. While the Banking Keyboard solution offers its users the ability to initiate and complete a wide range of financial services within any app, including social & messaging apps, the Earned Wage Access solution provides employees with instant access to their already accrued wages before payday.
To learn more about Match-Maker Ventures and our solutions for the banking industry, check out the rest of our portfolio here.