The future of banking lies in the integration and personalisation of financial services. Embedded finance and contextual banking offer innovative solutions that make life easier for customers and open up new opportunities for businesses. By seamlessly embedding financial services into customers' daily lives and using advanced data analytics, banks and corporates can not only increase customer satisfaction, but also ensure their competitiveness in an ever-changing marketplace.
In today's dynamic world of finance, traditional banking boundaries have been surpassed. New technologies and customer needs have paved the way for innovative approaches such as embedded finance and contextual banking. These concepts are revolutionizing the way financial services are offered and used. Let's define these terms and explore the advantages they offer customers and companies.
Stefanie Auge-Dickhut's blog post " The journey from open banking via embedded finance to contextual banking and the future role of banks " on ccecosystems.news describes the development of banks from traditional banking to new business models such as open banking, embedded finance and contextual banking. This is about the integration of banking services into the digital lives of customers.
What is embedded finance?
Embedded finance refers to the integration of financial services directly into the products and services of non-banking companies. This allows customers to use banking services without having to leave the third-party platform or application.
Examples of embedded finance:
Payment services in e-commerce: Customers can pay directly on an online retailer's website without having to use external payment portals. A prominent example is the integration of Samsung Pay into the Solarisbank ecosystem.
Banking apps: Hypothekarbank Lenzburg provides its banking license to operate the modern banking app Neon.
Benefits of Embedded Finance:
Increased reach: Financial services are embedded directly into customers’ everyday digital environments, resulting in greater visibility.
Seamless customer experience: Customers benefit from a smooth and convenient use of financial services without having to switch platforms.
New revenue streams: Companies can tap into additional revenue streams by integrating financial services.
What is contextual banking?
Contextual banking goes one step further. It provides financial services at the exact time and in the context of the customer's needs, based on data and analytics that take into account the customer's behavior and preferences.
Examples of contextual banking:
Buy Now Pay Later: Customers are given the option to pay in installments directly when purchasing a product in e-commerce or at the point of sale, based on their creditworthiness and individual financial data.
Personalized loan offers: Based on real-time credit checks, customers receive personalized loan interest rates that are precisely tailored to their current financial situation.
Benefits of Contextual Banking:
Personalization: Customers receive customized financial services that are precisely tailored to their needs and situations.
Flexibility: Financial services are offered exactly when they are needed, increasing customer satisfaction and loyalty.
Data-driven decisions: By using real-time data, banks and companies can make more precise and relevant offers.
Differences between embedded finance and contextual banking
Although both concepts aim to seamlessly integrate financial services into customers’ lives, there are key differences:
Integration vs. Context:
Embedded Finance focuses on the general integration of financial services into the products and services of other companies.
Contextual banking offers specific and personalized financial services based on individual customer needs and context.
Use cases:
Embedded finance refers to the general availability of financial services within other platforms.
Contextual banking provides personalized financial services in specific situations based on real-time data and analytics.
Technological requirements:
Embedded finance requires technological integration and partnerships between banks and third parties.
Contextual banking also requires advanced data analytics and the ability to interpret customer behavior in real time.
Conclusion
The future of banking is bright! It's all about integration and personalization of financial services. Embedded finance and contextual banking are offering innovative solutions that make customers' lives easier and open up new opportunities for companies. By seamlessly embedding financial services into customers' everyday lives and using advanced data analytics, banks and companies can not only increase customer satisfaction, but also ensure their competitiveness in a constantly changing market.
Partes is ready to play a key role in the implementation of embedded finance and contextual banking! We're excited to act as a technology integrator, strategic advisor, and partner broker. By providing tailored solutions and supporting the development of innovative business models, we'll help our clients fully exploit the benefits of these new approaches and compete in an ever-changing financial market.
Stay tuned to learn more about the latest developments in the financial sector and how your company can benefit from these innovations!
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