Get new customers through embedded finance
More financial institutions will begin to offer financial services to consumers through embedded finance. This will allow them to acquire new customers through the brand of a non-bank entity (such as a retailer or fintech) rather than their own brands. For example, in 2019, tech giant Apple started offering the Apple Card through Goldman Sachs. We expect these models to become more prominent this year.
The other route involves a traditional, enterprise bank offering the non-bank entity the software and security necessary to stand up its own offerings. For example, digital lender Society One offers customers everyday transaction and savings accounts, underpinned by Westpac's banking-as-a-service platform.
With these models, Apple's customers become Goldman's, and SocietyOne's customers become Westpac's. More such partnerships will likely follow as banks look to attract new customers and as cloud-based core banking platforms, which provide the connective tissue for such partnerships, mature.
"Embedded finance is an important evolutionary step from open banking and banking-as-a-service," says Jerry Silva, program vice president for IDC Financial Insights. "This step is critical to reach a future of industry ecosystems, where financial institutions will participate, and in some cases, govern, the sharing of data, applications, and operations with multiple industries on behalf of customer journeys."