9th February, 2023
Evaluating the ongoing developments in open banking and fintech, it would be interesting to see how travel companies go about capitalizing on the same.
Some of the concepts in embedded finance have been around for a while, but what makes the situation interesting in this sector now is digitization of commerce. This is being seen in embedded payments and embedding lending gaining momentum. The largest usage of embedded finance today is for payment. For their part, travel e-commerce entities can evaluate how they can deliver contextual experiences, by banking on their first-party data.
Regulation, implementation, and adoption of open banking are driving the ecosystem towards a new era. It is being highlighted that regulators in Asia are open to testing embedded solutions where it can help increase financial inclusion. Open banking has paved way for third-party fintech players to access consumers’ banking data and even conduct transactions on their behalf.
Other than embedded finance and CX, companies can dig into understanding the functioning of banking-as-a-service, involving licensing of requisite banking infrastructure, such as payment processing, to non-bank companies.
According to McKinsey, the embedded-finance product portfolio is expected to grow further as “customer-onboarding and product-servicing processes are gradually digitized and real-time risk analytics and services grow more sophisticated”.
Varying levels of maturity across industries
Bain Capital recently highlighted that different industries show varying levels of maturity in embedded finance. It added that retail and e-commerce platforms form the lead use cases. They’re highly digitized, with universally accepted checkout and payment options.
Last year Bain also projected that financial services embedded into e-commerce and other software platforms accounted for $2.6 trillion, or nearly 5%, of total US financial transactions in 2021, and by 2026 will exceed $7 trillion.
Who will take big the step, foraying into relatively unexplored offerings? For instance, banking and financial services aren’t limited to banks anymore, and e-commerce players are looking at embedded investments and money management. For their part, non-financial players would need to look at aspects like customer experience optimization and trust.
Travel companies must look at areas like identification and authentication by utilizing mobile authentication and behavioral biometrics to improve upon CX and security-related issues.
What to expect going forward?
By Ritesh Gupta,
Ai Team
