“Embedded finance is in its first inning,” if the FinTech “revolution” that arose in the aftermath of the financial crisis is still in its early stages.
According to Matthew Valente, head of product strategy at FIS, “we’re only scratching the surface” as traditional financial institutions and FinTechs partner to give everything from bank accounts to lending products to a broader audience via digital channels.
While many observers may confuse the terms embedded finance and BaaS, Valente clarified the distinctions. “Embedded finance is the true “experience” provided to the individual consumer or company client, whereas banking-as-a-service is the “enabler” of embedded finance,” he says.
A Natural Evolution
We’re seeing a shift in embedded finance, he continued.
Although Uber stands out as a pioneering example of how to effortlessly incorporate payments into the user experience, Valente points out that restaurants, software platforms, and retailers have all caught on. According to Valente, banks have become more interested in providing BaaS, particularly those that employ FIS as a service.
He claims that the current macroeconomic headwinds would not halt the growth of BaaS and embedded finance. The majority of companies, large and small, are changing their investment plans for the following year. However, because there is a demand, as Valente pointed out, expanding financial services, payments, and loans will be on their agendas.
