Integrated finance: consumers, SMEs and banks


Rémy Carole, vice-president of operations at First of the Treasurytold PYMNTS in a recent interview that embedded finance – the ability of FinTechs and other businesses to offer banking services to their end customers – can have positive ripple effects across entire ecosystems.

First, there are the light-touch ways in which these companies offer these services through bank as a service platforms (BaaS) – “with relatively low effort”, as he noted, “so they can focus on their core business” while realizing additional revenue streams.

Offering ancillary financial services and products also adds additional value to end customers, making relationships with these users stronger.

“On the other side of the equation are the banks,” he said. Embedded funding helps traditional financial institutions (FIs) grow their core business of buying and selling deposits, while increasing transaction revenue.

“Integrated finance ultimately reduces the cost of customer acquisition and deposit costs for these banks,” he said.

Integrating this functionality is not easy, he said, and it can be a technically heavy task. But as Carole noted, application programming interfaces (APIs) enable companies (Treasury Prime among them) to offer business banking services, creating platforms that make it easier to create financial products. These APIs allow for greater connectivity with banks, as they exist as a “technology interface” that can bypass archaic technology that may still be a staple of banks’ back-end processes.

Simplified connectivity, Carole added, helps meet end-user expectations in an increasingly digital world, where new financial offerings are accessible via a website or app.

In this context, Carole said, integrated finance has the potential to truly disrupt and transform a number of verticals. As an example, he mentioned the real estate industry, where landlord/tenant interactions are still largely through paper checks.

“It’s an archaic world,” Carole said. However, integrated finance pushes these outdated practices more firmly into the 21st century, making these payments as intuitive as clicking a button on a screen after connecting a bank account to a number of payment options.

Transform B2B payments

Integrated finance can also help transform B2B payments, he said, by making it easier for buyers and suppliers to meet and transact in online marketplaces.

Shopify, to cite just another example, uses integrated finance to provide financial processing technology to merchants. This allows these businesses to get paid sooner, with lower fees, and also helps Shopify provide loans to these merchants.

Digging a little deeper, he added that small and medium enterprises (SMEs) represent the perfect use case for integrated finance. They enjoy improved cash flow through faster payment. For their own end users, he said a key strategic differentiator is customer experience.

The easier it is for a customer to interact with the SME, he said, the more likely they are to remain loyal to the company. The SME that can issue cards to its business customer will likely have an advantage (and profit from trading revenue) over businesses that do not offer these cards.

“We’re heading to the place,” he told PYMNTS, “especially in the world of integrated finance and APIs, where ease of use becomes table stakes. And SMBs need to think how they deliver value to their customers.”



About: More than half of utilities and consumer finance companies have the ability to digitally process all monthly bill payments. The kicker? Only 12% of them do. The Digital Payments Edge, a collaboration between PYMNTS and ACI Worldwide, surveyed 207 billing and collections professionals at these companies to find out why going digital remains elusive.


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