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Embedded Banking : The next level of offering for financial institutions

Financial institutions have traditionally been comfortable in maintaining the ownership of customer relationships. The digital disruption in last 3-4 years has pushed them to adopt newer ways of banking, especially due to advent of plethora of fintech companies and neo-banks. That phase is gradually settling down with banks adapting to the tsunami of changes. Banks have either come up with their own fintech arms or collaborate with fintechs to offer their products and services.

Is this the end of the story? Well, may not be. The core business of banks and financial instituions s are still going to encounter the next level challenge. Can banking be controlled only by banks? The challenge is that customers are demanding banking services to be available integrated with different points of sale, devices, service providers etc. In short, banking services are expected to be embedded into virtually anything and everything. The end state is that banks no more own thae banking relationship with customers alone.

Why Embedded Banking:

This leads to the discussion on banking service being offered in SaaS (Software-as-a-Service) way. Pay-per-usage, subscriptions, renewals – these terms were never traditionally associated with banking services. However gradually there is growing customer demand for such flexible approach to payments for banking services. Let’s analyze a bit deeper, as to why such model is going to be the future of banking:

  • Only fees and interest income is not enough for banks. The margin out of it is not sufficient to meet current customer demands. Hence, fresh ways of reaching to customers with banking services is the need of the hour.
  • The line between technology companies and traditional banks is retreating day by day. It is no more possible to remain close to any one side of the spectrum. Banking has to be free flowing into different avenues to reach customers, rather than being tightly managed within traditional banking purview.
  • The balance between fragmentation and aggregation is another important angle to consider. Banking services need to be fragmented and granulated such that it is easier to adopt them in a 'pay as you use' way. At the same time, they need to be aggregated at customer relationship level to render maximum value to the customers.

Getting ready for Embedded Banking:

The disruption and hence demand for innovation in banking is endless. The next set of challenges for banks are going to come from embedded banking adoption and roll out. Let’s look at how can banks be ready in overcoming them successfully:

While we discuss about embedded banking, it is not so easy for banking and financial services companies. The banking offerings, technology stack in bank and market pull – all should be synchronized well to handle the customer smoothly. At the same time, it should be profitable for banks. Therefore, there are different balls to juggle with and still strike a balance to maintain profitability and customer retention.

  • The pricing and fees need to be relooked at. Periodic fees only may not make sense any more. Usage based charges, combined with one-time fee/ annual fee will be the way forward. The business model would be to push customers to use more and more of banking services.
  • Pilot studies can be done to assess market adoption rather going big bang. e.g. say for credit card usage and payments, banks offer virtual cards, pay per usage (value or no. of transactions) and give offers on overall customer relationship value. Banking will not be confined to its ecosystem anymore. Customer are free to use it anywhere and get consolidated billing and payment options. Once successful, banks can extend more products and services to follow the same route.
  • Banking services would be required to be part of workflow rules, decisioning algorithms, wide range of service platforms, local and global software solutions, different devices, peripherals etc. The API or web-services that will be required to be used to communicate between different solutions and platforms have to be standardized, nimble and easily adoptable.

The Embedded Banking advantage:

  • Customers get more flexible choice of selecting offerings that make sense to them and pay for their extent of usage.
  • Greater transparency in banking offerings and their pricing brings in customer loyalty.
  • Making life simpler for customers, especially in the SME (Small and Medium Enterprises) segment. Irrespective of their size of operation, banking services should be embedded into their day-to-day operations, thus reducing the need to switch between different systems, combination of manual-automatic steps etc.
  • Generation of new revenue in extending embeddable services to different vendors, customers.


Customers are ever demanding because they experience new challenges in their daily activities and lifestyle. Banks need to realize the pulse of customer and be ready to meet those challenges. Embedded banking can take banking experience to a different level for bank’s customer. A better prepared financial instituion will emerge as a game-changer in recent future for its customers.

The views expressed are personal views of  the author.


Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 18 December, 2019, 12:24Be the first to give this comment the thumbs up 0 likes

Banking is a regulated business. Only license-holding banks can carry out banking activities. If you really mean financial services, you might want to revise your post accordingly - as of now, it's a bit confusing, tbh.

While on the topic, can you name a few financial services that are / can be provided by nonbanks where the customer relationship is not / cannot be owned by a bank?

Satya Swarup Das
Satya Swarup Das - Unisys - Bangalore 18 December, 2019, 13:06Be the first to give this comment the thumbs up 0 likes

@Ketharaman Thanks for replying .I have a different opinion here:

1.With open banking proliferating banking is no more 'the regulated' business. 

2.An example: "an insurance provider using bank's data to sell insurance product to customers". where bank wills to share data through open API with the 3rd party(insurance provider). Primary relationship is there with bank. Bank charges service charges for sharing data with insurance provider(3rd party) for using banking offerings as service.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 18 December, 2019, 13:54Be the first to give this comment the thumbs up 0 likes


Sorry but you're confusing Channel with Industry. 

When an Insurance Provider sells an Insurance Product to a Bank's Customer, the industry is still Insurance. Banking is only the Channel.  

Insurers were accessing Banking customers via credit card statement inserts 30-40 years ago, via TransPromos on credit card account 10-20 years ago. By doing that via Open Banking now doesn't suddenly change the fact that, then and now, Insurance industry is not Banking industry.