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Why CX is a key differentiator in the rise of embedded finance

What's driving the rapid rise of embedded finance, what are the key benefits, and what role does CX play in this exciting new trend?

By Subarna Ganguly, Staff Writer

Last updated February 23, 2024

Embedded finance has become a hot topic in the last few years, offering new revenue streams for FinTechs, businesses and financial services providers alike. In fact, according to McKinsey, the value of the embedded finance market reached $20 billion in the United States in 2021, while over half of European retailers (56 per cent) plan to launch new embedded finance offerings.

But what exactly is embedded finance and what are its benefits? In short, it allows organisations across all sectors to integrate financial products and Banking-as-a-Service (BaaS) solutions into their existing customer offerings. These integrated tools, which are powered by banks and financial institutions, enable them to deliver better, more holistic and more frictionless experiences for the people they serve.

Multiple drivers, multiple benefits

The rapid rise of embedded finance has been driven by multiple factors, chief among them open banking. Its inception in 2018 unlocked competition in retail banking, enabling FinTechs to access customer banking data and then use that information to build new financial tools and services.

As well as driving collaboration between banks and FinTechs, this surge in data access also sparked higher levels of innovation, creating more options for customers when it comes to fast, convenient financial products and services – from payments and loans to insurance and branded credit cards as well as Cashback program and debit cards

What’s more, this demand is growing all the time, leading an ever increasing number of FinTechs, retailers and other businesses to respond by integrating them into their existing websites, platforms and apps. Banks, too, are seeing the benefits of collaboration, accelerating the level of choice – and competition – in the market.

So far, companies with a strong brand, large customer base and established infrastructure have been best positioned to benefit. Several telcos, for example, now offer payment services, mobile phone insurance and loans, while many retailers are introducing options like Buy Now Pay Later (BNPL), product insurance and loyalty card reward schemes. Embedding Finance is reinventing the retail industries: financial services being offered by non-financial entities is changing the way we interact with brands (and banking products) example : Zalando and Otto with own payment divisions or Apple with BNPL.

Yet in a fast-growing field, there is always room for invention, meaning we can expect to see an exciting range of start-ups emerge in coming years equipped with innovative new APIs targeting transforming customer needs. Already, a new wave of small businesses are entering the market using embedded finance solutions to offer corporate credit cards, business loans and borderless banking.

CX holds the key

So, in an ever more crowded and competitive marketplace, how can organisations differentiate themselves from their peers? Answer: CX. As user expectations around efficiency, speed and personalisation grow, a firm’s ability to build trust and loyalty among existing customers while attracting new ones via positive word-of-mouth will hinge on meeting – and even exceeding – people’s expectations during every interaction.

Financial services leaders recognise this fact too. According to Zendesk’s CX Trends 2023 Report, 82 per cent agree that delivering good CX is essential to hitting their goals while 90 per cent expect to increase their CX budget in the next 12 months, ahead of the global average of 80 per cent. For many, this means harnessing the power of advancing technology, with 81 per cent of leaders saying they will increase their artificial intelligence (AI)/bot budgets in the next 12 months, well above the global average of 67 per cent.

Yet there is work to do too. Despite widespread recognition of the competitive advantage provided by excellent CX, 54 per cent of consumers still say that customer service feels like an afterthought for most of the businesses they buy from. It is therefore vital that any organisation seeking to embed and expand embedded finance solutions in their operations also invests the necessary resources into training customer service agents and deploying the right supporting tools to deliver a premium CX at every touchpoint.

As for how, the best place to start is with the latest customer service technologies. At Zendesk, we provide a complete customer service solution, which allows you to easily integrate our products with other platforms. We also provide easy to use, customisable tools that can help you integrate embedded finance into your existing product and service offerings. Most importantly, the flexibility of our tools can help you scale your business, ensuring that as the needs and expectations of your customers evolve, the experience you offer them continues to be a positive differentiator rather than a reason for them to go elsewhere.

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