It was a pleasure to take part part at the virtual Amsterdam Fintech Week 2020 #XFW20 by joining the Hubuc panel on Banking-as-a-Platform, APIs and embedded banking. In a nutshell, embedded banking allows any brand to integrate financial services seamlessly, which impacts both infrastructure providers, brands, banks and of course consumers themselves. That’s why it was great to include the perspectives of both Mastercard and Currencycloud, who participated in the panel as well.
Imagine a world where any brand can easily launch their own financial products
Embedded banking can be generally defined as financial services that are seamlessly embedded in third party environments. The latest examples of embedded banking are Uber’s invisible payments, Klarna’s frictionless online checkout service, the Apple card or Shopify’s integrated account and loan offerings.
While in the past brands had to turn to incumbent banks’ white label offerings, latest embedded banking use cases are built on modern technology infrastructure, enabled by Banking-as-a-Platform (BaaP) providers. These BaaP providers offer whitelabel financial services (e.g. accounts, payments, card products or lending) through modern APIs in a modular, flexible and secure manner. Their unique advantage is efficient API connectivity, quick sandbox access, easy integrability and the option to outsource the complex regulatory requirements to the BaaP provider. This shift towards modular integrations by tech-enabled financial infrastructure providers is a stark contrast to the incumbent banks’ white label services, which usually are characterized by long RFP processes, large upfront investments and legacy technologies.
Upcoming Banking-as-a-Platform players, such as Hubuc, Swan or Solarisbank, now got a headstart in the European market. If incumbent banks want to seriously compete in the BaaP space, the panel generally agreed that they will rely on three key success factors:
- leadership commitment and understanding of API-driven business models
- new agile, flexible operating models that make it easy for external brands to quickly tap into banking data and capabilities
- new capabilities centered around API technologies, i.e. modern cloud infrastructure, API management platforms, etc.
Have a look at our latest blog post about embedded banking for further reading.
We further concluded that API-driven banking will change the financial services landscape over the next five to ten years, with software providers (e.g. accounting or ERP SaaS providers) as a likely early adopter segment. Furthermore, every financial services player, e.g. banks, fintechs or integrators, now needs to evaluate its own role in the ecosystem. For instance, possible strategies range from launching a product factory to becoming an ecosystem orchestrator.
Thanks for the great discussion and see you next year – hopefully again in person.
Re-watch our panel below: