How banks can unlock revenue sources with embedded finance
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How banks can unlock new revenue sources with embedded finance and data

Balkrishan “BK” Kalra

President and Chief Executive Officer



In this difficult economy, big banks' strategies will increasingly hinge on new revenue streams, above and beyond deposits. Here are two trends you can start tapping into now.

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."

Monetize your data

Data will also unlock new revenue streams for banks. Banks will increasingly 'walk the talk' when it comes to data. They'll look for ways to use the troves of it that are at their disposal to provide new and more personalized, timely, and relevant services and offerings to customers, better meet regulatory requirements, and unlock new monetary opportunities. This will require improved data quality, which yields more reliable customer insights and enhanced regulatory compliance. It will also require better internal data integration, which delivers a more complete view of the consumer by connecting customer data sets across internal information silos. ING and Bank of Montreal are two financial institutions leading the charge to improve data quality and internal data integration.

Ultimately, such advancements will enable the cross-pollination of data within the broader market ecosystem, which will generate monetizable insights. For example, financial institutions that issue private-label credit cards to retailers will combine their own (high-quality, well-integrated) internal data on their small and medium business customers with alternative data from third-party data providers (such as Nielsen or IRi) and data from the retailer itself. This will empower the financial institution to help retailers optimize sales. How? By generating actionable insights that identify which customers the retailer should target with which offers, and when, to achieve the best return on their marketing investments. The result? A 'pay-to-play' environment where those retailers that pay for banks' golden consumer insights outpace those that don't.

Stay tuned for more key trends that will shape the banking industry in 2023.

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