Information and Analytics about Embedded Finance, BaaS and Open Banking

Payment firms are facing a stern warning from the Bank of England (BofE) regarding the imperative need to enhance their readiness for forthcoming ‘operational resilience’ regulations set to take effect next year, as stated in Finextra. The fresh standards are poised to enforce robust measures within financial market infrastructure (FMI) firms, ensuring minimal disruption to payment systems amidst potential crises such as cyberattacks or severe weather events. Sasha Mills, the Bank’s executive director for financial market infrastructure, underscored the urgency of preparation in her recent address, stating, «Ahead of the March 2025 deadline, the BofE expects to see FMIs accelerating their efforts to ensure that they have calibrated their tolerance for negative impacts on their important business services, and mapped the key people, processes, technology, facilities, and information needed to deliver these services.» Mills emphasized the necessity for firms to commence testing their capacity to handle adversities, asserting, «Firms need to start testing their ability to deal with an issue, and the Bank expects to see greater engagement than we have seen thus far between FMIs, their participants, and the wider market, for the calibration of impact tolerances.» Moreover, Mills highlighted a critical area that demands substantial refinement, noting, «Another area that still requires significant work is the approach and method FMIs use to test disruption to important business services.» This cautionary directive underscores the gravity of the impending regulations and the imperative for payment firms to expedite their readiness efforts.

The landscape of payments technology is undergoing a seismic shift, driven by the rapid advancements in artificial intelligence (AI) and cloud computing, according to Finextra. As highlighted by Claudia Olsson, CEO and founder of Stellar Capacity and a Young Global Leader of the World Economic Forum, at EBAday 2023, the existing structures are ill-prepared for the disruptive potential of these technologies. Olsson emphasized the imperative to reconceptualize global architecture to harness the full potential of cloud computing and AI. Fast forward to EBAday 2024, and these prophetic words are at the forefront of discussions. Cloud computing, touted for its flexibility and scalability, has gained traction among European banks. However, there’s a consensus that its utilization has not reached its zenith. The concept of payments-as-a-service looms large, urging payments practitioners to ponder its viability. Moreover, the emergence of generative AI, epitomized by technologies like ChatGPT, has ignited fervent discussions. While rule-based AI has been the norm, the transformative power of large language models heralds a new era of differentiation for PSPs. Yet, the quest for AI supremacy rages on, with US tech giants sprinting to establish dominance in generative AI. Microsoft’s Azure witnessed a staggering 31% revenue surge in 2023, attributing much of its success to AI investments. This underscores the urgency for financial institutions to embrace AI or risk lagging behind. The cloud remains pivotal in the digital transformation of banking and payments. EBAday 2024 in Lisbon, Portugal, slated for 18-19 June 2024, promises insights into crafting strategies that streamline operations, boost scalability, and accelerate time to market in this era of technological upheaval.

Embedded finance has become a transformative force in the realm of financial services, merging fintech solutions with various non-financial businesses, thereby reshaping how individuals shop, pay, and work, as outlined in FinTech Magazine. The integration of insurance offerings into e-commerce platforms, one-click payments via mobile applications, and branded credit cards exemplifies the shift in consumer-business financial interactions. Industry leaders convened in a recent roundtable discussion to delve into the profound impacts of embedded finance on the sector. Notably, Radha Suvarna, Chief Growth Officer at Finastra, highlighted the significant role embedded finance plays in unlocking new revenue streams for non-financial businesses. The seamless integration of financial products within everyday transactions not only enhances the customer experience but also fosters stronger relationships between merchants and consumers. Peter O’Halloran, VP and Head of Enterprise and Digital Commerce at Fiserv, emphasized the transformative potential of embedded finance in streamlining payment processes. By embedding buy-now-pay-later options into checkout processes, businesses can capture additional customer spend while ensuring a frictionless payment experience. Furthermore, the integration of multiple financial services tailored to individual needs facilitates a more seamless consumer journey, ultimately boosting retention and loyalty. Karine Martinez, Head of Sales for Edenred Payment Solutions, underscored how embedded finance has revolutionized customer expectations, citing examples like Uber and Instagram shopping, where consumers now anticipate seamless interactions encompassing sourcing, communication, and payment within a single platform. From a business perspective, embedding financial capabilities enhances customer loyalty and serves as an additional revenue stream. Ryan O’Holleran, Head of Sales, Enterprise at Airwallex, highlighted the untapped potential of embedded finance, particularly for small and medium-sized businesses (SMBs). Despite its growing traction, a significant gap exists between interest and accessibility to embedded financial services, especially among SMBs. Traditional banks overlook this market segment, creating an opportunity for non-finance brands to leverage their existing customer relationships and data to offer tailored financial products. Looking ahead, industry experts foresee embedded finance as a catalyst for future innovation and growth in the financial services landscape. Its seamless integration into various digital platforms enables businesses to meet diverse customer needs efficiently, unlocking new revenue streams and fostering customer loyalty. Additionally, as traditional barriers between industries blur, embedded finance stands poised to facilitate global expansion for businesses by enabling efficient money movement and attractive FX capabilities. Despite its promising prospects, several barriers hinder the widespread adoption of embedded finance. Economic headwinds and technological constraints pose challenges for financial institutions seeking to roll out embedded finance solutions. However, strategic partnerships and a focus on real use cases that drive client value can help overcome these obstacles and accelerate market entry. In adapting to the embedded finance paradigm, companies must remain agile and evolve their business models to align with customer preferences. By leveraging embedded solutions to provide choice and convenience in payment options, businesses can create stickier relationships with customers while gaining valuable insights into consumer behavior and market trends, thereby driving growth and expansion.

The Fintech Times delves into the realm of embedded finance, exploring the fusion of financial services with non-financial products and services. This emerging field promises remarkable transformations, and as it evolves rapidly, attention is drawn to the latest developments, initiatives, and hurdles it presents worldwide. As our focus shifts to the future of embedded finance, it’s essential to contemplate the potential innovations on the horizon. Andrew Martin, CEO of SMEB, envisions a landscape where embedded finance ushers in a new era of personalized pricing, real-time decision-making, and automated utility switching. Martin emphasizes how these advancements could redefine the financial ecosystem, making financial activities seamless and empowering for consumers. Andy Davies, a senior global payments specialist at Endava, underscores the profound impact embedded finance could have on payment processes and revenue streams. Davies highlights the importance of customer centricity in driving innovations, foreseeing scenarios where mundane tasks like parking payment are seamlessly handled through embedded finance models. Joan McGowan, head of US financial services consulting at SAS, points out the potential of AI-driven algorithms to revolutionize financial insights, fraud detection, and personalized recommendations. McGowan also explores how IoT, wearable devices, and others could further integrate financial services into daily experiences, promising greater security, efficiency, and transparency in transactions. Denise Johansson, co-founder and co-CEO of Enfuce, emphasizes the collaborative nature of embedded finance, noting how it fosters innovation across industries and enables tailored financial offerings. Johansson envisions a future where banking as a service (BaaS) empowers businesses beyond traditional banking realms, leading to a more convenient and personalized financial landscape. Michael Bystrov, chief revenue officer at Noda, highlights open banking as a catalyst for innovation, foreseeing a future where financial services seamlessly intertwine with daily activities, driven by AI, and IoT technologies. Eugene Krasicki, founder and CEO of Keytom, predicts a future where embedded finance becomes ubiquitous, making financial services universally accessible and tailored to individual needs in real-time. Krasicki envisions a world where smart contracts facilitate automatic payments, transcending intermediaries and streamlining transactions. The future of embedded finance holds immense promise, reshaping how we interact with financial services and integrating them seamlessly into our daily lives. As technology continues to advance, these innovations are poised to create a brighter, more convenient financial future for consumers and businesses alike.

Finastra, a leading global provider of financial software applications, has teamed up with ScotPayments, a centralised payments platform in Scotland, to bolster the security and accuracy of payment transactions, as highlighted in Fintech Global News. The partnership aims to deploy Finastra’s Bacsactive-IP Confirmation of Payee (CoP) service, designed to mitigate payment fraud and errors, particularly in Direct Debit and Direct Credit transactions. Finastra is renowned for its suite of financial software solutions catering to the needs of global financial institutions. Their technology portfolio, which includes payment processing and risk management solutions, adheres to international standards, ensuring compliance and efficiency in financial transactions. ScotPayments, on the other hand, focuses on facilitating the digital transformation of public services in Scotland, ensuring secure and efficient payment services for various public sector requirements. The CoP capability introduced by Finastra through its Bacsactive-IP solution allows users to verify payment details accurately, thus mitigating fraud and reducing transaction errors. This technology holds particular significance in managing Direct Debit and Direct Credit transactions, where it significantly reduces indemnity claims and enhances transaction efficiency. Accessible through multiple channels, including an Open API module for seamless integration, pre-transaction payment file processing, and during account setup in the Bacsactive-IP system, the CoP service underscores flexibility and adaptability to diverse user needs. Radha Suvarna, Chief Product Officer, Payments at Finastra, emphasized the significance of CoP in streamlining payment processes, stating, “Without CoP, users face a cumbersome process requiring intervention and resolution from failed Direct Debit Instructions and Direct Credit payments. Our emphasis on identifying and rectifying issues at the initiation stage underscores our commitment to delivering seamless experiences for our clients. The solution taps into our fintech open ecosystem to manage the real-time checks with the account holding banks. This open finance approach is empowering communities and democratizing payments.” By combining the expertise of Finastra in financial software solutions with ScotPayments’ focus on public service digital transformation, this partnership is poised to make significant strides in minimizing payment fraud and enhancing the efficiency of payment transactions in Scotland.

Visa, a global leader in payment solutions, has unveiled its latest endeavor in the United States: an open banking offering facilitated by its recently acquired partner, Tink, as stated in Fintech Global News. The initiative, as reported by Finextra, marks Visa’s foray into the realm of open banking, allowing users across the US to seamlessly link their accounts and authorize trusted entities to access their financial data. Through a consolidated interface, users gain access to a spectrum of financial functionalities, ranging from verifying account information to conducting real-time balance inquiries and retrieving transaction details from a multitude of banks scattered throughout the nation. The integration of Tink’s technology into Visa’s ecosystem ensures a secure and efficient open banking experience, tailored to meet the evolving demands of both consumers and businesses alike. Visa’s CEO, Ryan McInerny, emphasized the strategic significance of the collaboration, stating, «Just about two years ago we acquired Tink as we saw opportunity in open banking. Over those two years, we have been expanding our presence in Europe, winning deals with Adyen and Revolut. We’re now expanding open banking solutions through Tink into the United States.» The move comes at a time when open banking is gaining traction among American consumers, with a recent survey commissioned by Visa revealing that a remarkable 87 percent of respondents are already leveraging various forms of open banking to integrate their financial accounts with third-party services. However, despite the widespread adoption, there remains a significant gap in consumer awareness, with only 34 percent of respondents fully cognizant of the capabilities unlocked by open banking. In light of this, Visa has embarked on a consumer education initiative aimed at shedding light on the manifold benefits offered by open banking services. The venture signifies Visa’s commitment to driving innovation within the financial landscape, with the integration of open banking poised to redefine the dynamics of financial interactions in the US market.

Shopware, the renowned e-commerce platform, has joined forces with Brite Payments, a leading provider of instant bank payments solutions, to enable customers of its merchants to make instant payments directly from their bank accounts, as highlighted in The Fintech Times. The integration of Pay by Bank, an account-to-account (A2A) open banking-based payment solution from Brite, facilitates highly secure and cost-effective transactions through the Brite Instant Payments Network (Brite IPN). Shopware merchants can effortlessly access this comprehensive solution via a Shopware 6-compatible plugin, offering a seamless payment experience to their customers. According to recent research conducted by Brite Payments, a significant portion of Germans, approximately two-thirds, are familiar with Pay by Bank. Among younger demographics, such as 18-29 year-olds, over one-third already utilize this payment method daily or weekly, showcasing its growing popularity. Moreover, the study indicates a considerable willingness among Germans to explore new online payment methods, underscoring the vast potential within Shopware’s primary market. Shopware, with its flexible and scalable platform catering to over 45,000 merchants, has been experiencing robust growth, particularly in Germany. With an annual growth rate of 40%, Shopware merchants collectively process approximately €22 billion in gross merchandise volume (GMV) annually. Although Shopware has a significant presence in Germany, its reach extends rapidly across Benelux and the Nordic countries. This expansion aligns with Brite’s recent launch of Brite Instant Payments in Germany and its broader strategy to provide comprehensive support to merchants across Europe. Brite Payments, headquartered in Sweden, recently secured a $60 million fundraise in October 2023, signaling its growth trajectory. The partnership with Shopware aligns with Brite’s expansion plans, enabling it to extend its product coverage across Europe. Brite Instant Payments presents businesses with an opportunity to address operational inefficiencies and overcome challenges associated with traditional payment methods. Instant processing ensures predictability and reduces fraud risk, while also eliminating costly chargebacks. Additionally, the refunds process, often complex in e-commerce, can be streamlined with Brite Instant Payouts. Alexey Pronin, general manager EMEA at Shopware, expressed excitement about welcoming Brite Payments as a Gold Technology Partner, emphasizing the commitment to providing merchants with diverse tools to succeed in the evolving landscape of online commerce. Luke Trayfoot, chief commercial officer at Brite Payments, highlighted Shopware’s market leadership in Germany and the value of offering their intuitive instant payments solution to leading brands. The collaboration between Shopware and Brite Payments marks a significant step towards enhancing the payment experience for e-commerce merchants and their customers. With the integration of Brite Instant Payments, businesses can embrace modern, customer-centric payment solutions to drive growth and improve operational efficiency.

Stripe, the renowned payments processing provider, is undergoing a significant strategy overhaul aimed at enhancing accessibility and attracting larger-scale organizations as clients, as outlined in FinTech Magazine. In a recent announcement, the fintech giant revealed its decision to separate its payments service from its broader technology stack, marking a departure from its previous integrated approach. This strategic move, driven by heightened competition from industry rivals like Adyen and PayPal, aims to streamline the user experience for merchants. By decoupling its payments service from the tech stack, Stripe enables companies to utilize alternative payment providers while retaining access to its extensive suite of services. John Collison, Co-founder of Stripe, emphasized the motivation behind this shift, stating, «As we’ve gotten into these larger and larger customers, they have more constraints, you’re dealing with different parts of the organization, and so this makes it easy to adopt the best parts of Stripe.» In tandem with this restructuring, Stripe introduced new embedded finance features and AI tools to its product lineup. Additionally, it expanded its issuer network with the inclusion of American Express and forged partnerships with leading US card issuers like Capital One Financial and Discover Financial Services. At the recent Sessions conference, Will Gaybrick, Chief Product Officer at Stripe, highlighted the company’s commitment to modularity, asserting, «We’re extending our modularity to the very core of Stripe: payments processing. All of Stripe’s products will gracefully inter-operate with third-party processors.» These developments reflect Stripe’s overarching mission to bolster the GDP of the internet while addressing the evolving innovation needs of global businesses and merchants. Looking ahead, Stripe aims to provide enhanced support to its clients and partners in navigating the intricacies of the payments landscape, leveraging AI to drive sustained growth, and enhancing platform modularity to cater to diverse user requirements.

In a move poised to reshape the financial landscape, Visa has ushered in a new era of open banking in the United States through a strategic collaboration with Tink, a Swedish technology firm acquired by Visa for €1.8 billion in March 2022, according to Finextra. Open banking, a concept gaining rapid traction globally, empowers consumers to securely share their financial data with trusted third parties, revolutionizing how individuals manage their finances and access innovative services. Visa’s integration of Tink’s technology into the US market marks a significant milestone, enabling American users to seamlessly connect their accounts and grant authorized entities access to their financial information. This groundbreaking initiative promises to enhance financial transparency, foster competition, and fuel innovation within the banking sector. In Europe, the partnership between Visa and Tink has already garnered acclaim, securing major collaborations with industry leaders such as Adyen and Revolut. Now, with the US launch, Visa has solidified data access agreements with key players on the merchant side, including Capital One, Fiserv, Jack Henry, Dwolla, and Max rewards, positioning itself at the forefront of the open banking revolution. Accessible through a unified console, users can leverage the platform to perform a myriad of tasks, ranging from confirming bank account details to conducting real-time balance checks and accessing transaction data from a vast network of banks across the US. This streamlined approach promises unparalleled convenience and efficiency for consumers and businesses alike. Visa’s CEO, Ryan McInerny, underscores the company’s commitment to driving innovation and fostering financial inclusion, stating, «Just about two years ago, we acquired Tink as we saw opportunity in open banking. Over those two years, we have been expanding our presence in Europe, winning deals with Adyen and Revolut. We’re now expanding open banking solutions through Tink into the United States.” Despite the widespread adoption of open banking among US consumers, Visa’s recent survey revealed a glaring gap in awareness, with only 34 percent of respondents recognizing the full spectrum of benefits enabled by open banking services. In response, Visa has embarked on a comprehensive consumer education campaign to illuminate the transformative potential of open banking and empower individuals to harness its advantages. As Visa and Tink spearhead the open banking movement in the US, the collaboration heralds a new chapter in the evolution of financial services, marked by greater connectivity, transparency, and empowerment for consumers and businesses alike.

In a rapidly evolving landscape where courage and agility are paramount, Thredd CEO Jim McCarthy underscores the critical role of compliance and innovation in shaping the future of payments. In a recent interview with PYMNTS, McCarthy delves into the strategic decisions driving Thredd’s success and offers insights into the broader trends shaping the industry. Thredd made waves in the first quarter with its strategic expansion into the United States market, recognizing the pivotal role of the U.S. as the largest addressable market in FinTech. McCarthy emphasizes the importance of risk management and compliance in an environment marked by heightened regulatory scrutiny, particularly in areas such as anti-money laundering and KYC/KYB protocols. Despite challenges posed by regulatory complexities and the contraction in the banking-as-a-service sector, Thredd has demonstrated early success in the U.S. market, underscoring its commitment to growth and innovation. McCarthy highlights the opportunities presented by embedded finance and the resurgence of cross-border transactions, particularly in sectors like corporate travel. Virtual cards emerge as a key tool for managing risk and controlling payments in the B2B travel space, reflecting Thredd’s focus on offering innovative solutions to its clients. McCarthy stresses the importance of reliability and performance in customer acquisition and retention, while also emphasizing Thredd’s agility in integrating innovations from network partners like Visa and MasterCard. As the landscape evolves, combating fraud remains a top priority, with McCarthy highlighting the proactive approach of commercial card networks in pioneering fraud prevention technologies. The widespread adoption of electronic payments continues to transform the financial landscape, with McCarthy noting the gradual obsolescence of cash in many sectors. Looking ahead, McCarthy urges finance leaders to embrace payments as a central component of business strategy, emphasizing the need to adapt to evolving consumer preferences and market dynamics. In an era where payments are at the center of business operations, Thredd remains poised to navigate the future with compliance, innovation, and a customer-centric approach.