The Revolution in Banking and Financial Services is no longer a futuristic concept; It is a reality in full acceleration. In the last three years, the industry has changed more than in the last hundred, driven by exponential technologies, and that will accelerate even more with the intensive use of generative artificial intelligence, augmented reality and the adoption of the Internet of things. However, there is a key factor that will have the ability to reinvent the financial industry, in the same way that Netflix changed entertainment and Uber revolutionized mobility: embedded finances: a trend that allows non -financial companies to offer financial products integrated within their platforms.
This model challenges the traditional banking structure today, allowing any company, regardless of its industry, to offer financial solutions to its customers within their value chains. The question then is not whether this change is an emerging opportunity or a model to adopt, but how and when we are going to adapt to it.
A bridge that burns. An English entrepreneur with whom I worked described the current banking situation, such as a burning bridge: a space where traditional entities must decide between moving forward with a radical transformation or being trapped in obsolete models. Today, post pandemic, this metaphor makes much more sense: digital transformation processes accelerated challenging banks to change their historical way of creating value; forcing them to rethink their role within the new value chain and their competitive future strategy.
But how can bank then transition to the current context, without dying in the attempt? Embedded finances propose a revolutionary model, of enormous potential, allowing technologies Next-Genaccelerating the launch times of new products and maximizing profits. In Latin America alone, it is estimated that it could generate more than 200,000 million dollars in new income in the next three years. Contactless payments, the “embedded lending” -embedded offers-, “embedded issuing” -emission of embedded cards -and B2B payment solutions for companies will be the main growth levers, with interannual rates between 2 and 5 times its current volume. This transformation could also help address a critical problem in the region that has not yet been definitively resolved: financial inclusion. There are still more than 300 million people and 25 million companies financially unattended in our region. The opportunity is huge.
A blue ocean to explore. Innovative companies are already capitalizing this model. Mercado Libre went from being an e-commerce to become the main Fintech of the region. YPF, a company of Oil & Gas, created an ecosystem and a digital wallet with more than 5 million users and enviable activity levels even for traditional banking. Even microcredit companies in Argentina managed to digitize their business model, going from operating in physical branches to sell digital loans through third -party -RETAILERS- with an unprecedented expansion. And what is more fascinating when transforming into a Fintech: they achieved in a few weeks, increase their sales 10x and reduce their structure costs more than 75%. They were born again.
What do these cases teach us? That flexibility and co-creation capacity are key to staying competitive in this new environment. The financial institutions that want to prosper should stop seeing technological platforms as threats and start collaborating with them to build scalable and sustainable business models.
Rewrite the role of banking. Adopt the model of embedded finance It implies that the bank changes mentality and role. What place do you want to occupy in the digital ecosystem? Where can they really provide differential value?
It is not possible to occupy all the roles of a chain, or be the leader in each segment. The success of Banking-As-A-Service It will lie to identify competitive advantages, establish strategic alliances, attract new talent that thinks different – philosophers, sociologists, psychologists – and develop new skills within work teams.
The banking of the future will not be defined by its offices, or by its own attention channels, but for its ability to integrate into digital ecosystems that offer immediate, hyperconnected and personalized experiences for their clients. Those who do not understand this change will be trapped in a bridge that is quickly burned.
Those financial institutions that manage to position themselves first within these new ecosystems and value chains, will be the protagonists of the new financial system.
The challenge is clear: reinvent or disappear. The time to act is now.
*Lucas Bianchi is Founder & CEO of Finket
For Lucas Bianchi
