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It’s hardly a newsflash for anyone working in banking or fintech that embedded finance is expected to grow exponentially over the next years. The main trigger for the growth of the embedded finance ecosystem is the ongoing API-fication of banking and fintech services, which has enabled a whole new set of contextual financial products and services to emerge. Banking capabilities, such as deposit accounts, payments, lending, as well as ancillary services, such as transaction data, customer verification or credit underwriting, are productised and offered via APIs, which abstract the inherent complexity of financial services away (think compliance and risk requirements) and allows any brand to integrate financial services into its customer-facing propositions. The main players that provide such banking-capability-via-API services are new cloud-based core banking providers, Open Banking providers, as well as Banking-as-a-Service providers, which have been emerging and growing fast in recent years. For example, Mambu, whose APIs enable lending, deposit and other banking products, has just raised its Series E round at €235 million, which values the tech company at €4.9 billion.
The logical next step in the embedded finance evolution in B2B is to not only productise banking infrastructure and capabilities via APIs, but to branch out into accounting, ERP, insurance or e-commerce tools that small businesses use on a daily basis: the API-fication of small business software. Ask any small business owner who recently applied for a loan at an incumbent bank – fast, digital customer experiences are still the exception and business owners loose precious time filling out forms and sending their financial statements and company data back and forth. Small business lending is just one use case of out of many. However, breaking up system-specific silos by pulling data from accounting and other mission-critical SME tools is the first step in enabling financial service providers to serve their business customers faster and more efficiently.