Open APIs and fintech innovation could intersect when open banking first spread over the Asia Pacific and the rest of the world. As a result, the usage of APIs to integrate financial services into non-financial platforms quickly expanded, giving rise to embedded finance as it is known today—a crucial component of contemporary digital services.

Nevertheless, what we have seen so far in embedded finance is actually just the top of the iceberg. The effects of embedded technology on banks, non-financial organizations, and the clients and customers they service will be extensive as it becomes more commonplace both in front of and behind the user interface.

We highlight the five ways embedded finance might alter the financial service experience to give you an idea of the extent of this impact.

1. Financial servicing, anywhere, anytime

The most prevalent embedded finance use cases for consumers today involve embedded payment, such as e-wallets used by delivery or shopping platforms, embedded lending, where deferred payment can be approved by a non-banking company providing credit, debit, and non-card options, and embedded investment, such as small insurance riders used to set a product apart from rivals.

It would be able to expand partnerships and collaborations with non-banking businesses and provide services that better fit modern customer demands if FinTech provided pre-built embedded solutions for API connectivity with financial institutions. And it’s also possible to accomplish what B2C can for B2B.

Until recently, only big businesses could use embedded financing solutions. FinTech changed it such that small businesses can now transition to digital B2B commerce to improve cross-border payment capabilities. Benefits include providing equal payment terms to all of a B2B company’s clients, regardless of where they are from. FinTech solutions also assist payment companies in determining the regulatory needs of various nations and potential areas of conflict. This is crucial for digital commerce’s buy now, pay later (BNPL) model since it enables a wider variety of embedded finance alternatives.

The development of innovation and new revenue streams in the financial services industry will swiftly accelerate as more businesses begin integrating embedded finance into their payment process. This would result in a time and place of independent access to financial services, or, in the words of tech investor Angela Strange, “any company will be a FinTech company.

2. Reaching the unbanked and underbanked

More than six in ten people in Southeast Asia are reportedly still unbanked or underbanked, according to the World Economic Forum. This is an increasing problem because micro, small, and medium-sized firms (MSMEs) in Southeast Asia are largely responsible for the region’s economies. MSMEs and their clients depend on access to financing and other financial services to maintain the region’s post-pandemic economic recovery.

Despite the difficulty in reaching the unbanked and underbanked populations, embedded finance unquestionably provides quicker, more cost-effective, and superior solutions to some enduring hurdles to financial inclusion. It gives people in emerging nations, who typically lack bank accounts and simple access to financial services, the ability to hold money digitally, make international payments, and perhaps even invest with nothing more than a smartphone and an Internet connection.

Super apps in the APAC region are paving the way for a variety of financial services to be made available over a platform, including embedded payment, lending, and insurance, as well as the lucrative embedded investment services. Examples include China’s WeChat, Australia’s Bano, and Southeast Asia’s Grab.

For instance, the Australia-based financial super app Bano aims to simplify money management for Gen Z and millennials. By incorporating Currencycloud’s APIs directly into Bano’s super app, it recently debuted an FX Converter that was made possible through cooperation. Bano now has access to Currencycloud’s competitive FX rates, enabling it to offer some of Australia’s lowest FX rates and the most affordable AUD to USD exchange rates to its customers.

Australian consumers of its investment package have access to US stock trading at the lowest price. Visitors from other countries can also quickly send and receive the money within the app in real-time and commission-free using more than 35 different currencies. This includes the currency exchange from any of these to Australian Dollars or vice versa, instantly.

3. Helping smaller banks grow

Despite everything that has been written about embedded finance’s benefits for customers, traditional banks can still gain a lot from it.

Banking-as-a-service products from FinTechs like Currencycloud, which have thousands of local banks, community banks, and credit unions in the APAC region, can quickly bolster their portfolio of banking services with new capabilities in automation and cross-border accounts, two of the most significant enablements to reduce cost and time for payment processing and to enable effective geographic expansion for themselves and their customers.

In order to assist consumers in realizing their aspirations, Currencycloud collaborated with Tonga Development Bank (TDB), whose overarching goal is to deliver dependable, financially inclusive solutions to clients through teamwork. Through card issuance and a payment gateway for SMBs, Currencycloud’s services allowed businesses to link technology and connection to online marketplaces. TDB was able to alter customers’ lives by creating a new revenue stream, assisting SMBs in modernizing, and granting access to digital payments in order to advance the country.

Instead of attempting to compete with embedded finance, banks should look into integration opportunities with such technologies to increase digital competitiveness without worrying about conflicting with a variety of rules or needing to invest in and maintain infrastructure.

4. Complementing big bank services

Embedded finance may complement the open banking ecosystems that the big banks in the area already have in place. Customers today are less likely to use credit cards and personal loans, so companies can take advantage of the Buy Now, Pay Later (BNPL) trend to reclaim some of their automatic revenue through the API economy, for instance.

The BNPL products of today give customers access to an embedded solution within a shopping platform or app. Financing is literally just a button click away during checkout for anything from a pair of shoes to a large-ticket item like a sofa or TV.

Banks can additionally feed their customer experience systems with the data produced by open banking and embedded banking. They may mine the data for insights that result in more complex user experiences and greater personalization for their customers by implementing advanced analytics with AI and ML.

5. More investment choices with better control of funds

By offering more investment options through more sales channels, embedded finance can give corporate and consumer users better control over their financial assets.

One such option that is exploding across lifestyle and investment platforms is the investment-linked insurance policy. This combines a sub-fund investment with life insurance protection. This long-term, low-upfront cost investment is generally thought to carry a lesser risk because it is simple to use. As a result, it is becoming more and more popular among novice or infrequent investors.

Fractional trading is popular on fintech investing platforms, such as the UK-based micro investor Wombat, for the more serious players.

Wombat draws the underserved small investor market segment with its platform services enhanced by embedded trading and features including the trading of fractional UK, US, and EU shares as well as the limitless commission-free trading of UK and US shares via a new, subscription-free service.

The financial services sector is becoming more thriving and competitive because of embedded finance. But it also means that without an adoption plan for banking as a service, traditional banking and financial services organizations risk quickly falling behind the competition. We are no longer in the era of financial services, but rather one of the financial service experiences, with digitization dictating a customer-first approach.