Embedded finance – how FinTechs seamlessly enhance customer experience

- By Collaborative Media & Publishing
When a consumer logs onto the Super-Rewards shopping platform, every time they buy something they add a little bit of cash to their superannuation balance.
They can earn up to 3% of their North Face purchase; up to 1.1% of Apple purchases; and up to 4% of Bonds purchases for their super account.
Importantly for the consumer, once they’ve signed up to Super-Rewards the super contributions happen automatically when they spend via the platform at any of 400 retailers.
Super funds also like the service, because it increases member engagement and increases their funds under management.
It’s an example of embedded finance, where a financial service feature is seamlessly incorporated into a traditionally non-financial service offered by non-financial companies.
Perhaps the best-known example is Uber, where the debit or credit card payment is included in the act of booking and taking a ride. At Super Rewards, it’s the accumulation of rewards money and the monthly transferral of the rewards into users’ super accounts via BPAY payments.
Pascale Helyar-Moray, the founder of Super Rewards, says that embedding the super account contributions into the shopping experience is key, because otherwise most people wouldn’t bother.
“It's the automatic set-and-forget mentality that we offer that is resonating with people,” she says. “Because it’s embedded, they literally don't have to make that conscious decision anymore.”
Embedded finance is a nascent trend, but one that’s heating up in Australia, says Justin Xiao, chief operating officer, Southeast Asia & Australia at Railsbank, which provides financial capabilities to non-financial businesses via APIs.
“By abstracting banking and insurance functionality into technology, embedded finance enables any brand or merchant to rapidly and at low cost integrate innovative financial services into new propositions and customer experiences,” he told the intersekt 2021 FinTech conference in Melbourne earlier this year.
“FinTech startups supported by VCs (Venture Capital firms) are currently taking the lead in creating sophisticated and better finance offerings via banking-as-a-service platforms. Companies and brands outside of traditional financial services are taking inspiration, and making bolder and more strategic moves to improve relevancy to their customers and look for new revenue streams.”
APIs like Lego blocks for embedded finance

Xiao says APIs are the fundamental building blocks of embedded finance. “We think of them as Lego blocks,” he said.
“We are decoupling functionality into API building blocks, with an always-on architecture, adhering to open industry stacks, and maintaining a compliant and fraud free environment where compliance is built into each transaction. We focus on democratisation of financial services, so anyone can be a FinTech.”
Dr Dimitrios Salampasis, lecturer in FinTech innovation and entrepreneurship at Melbourne’s Swinburne University of Technology, says embedded finance allows non-financial companies to offer an augmented customer value proposition. “This is a new way to boost a digital-led growth trajectory,” he says.
By incorporating financial services into their offerings, non-financial companies not only offer a better and more holistic customer experience, they can potentially add a new revenue stream as well.
They can also harvest more customer data as their customers use the additional services. “Utilisation of these data streams also enables the ability to provide further customisation and potentially further personalisation of services,” he says.
The majority of embedded finance applications have thus far been in payments.
But Salampasis says he expects other applications in areas including insurance, consumer lending, wealth management and compliance. “Payments and banking services have been at the forefront of innovation change, so it would be by default that we would be seeing more action there rather than the other kinds of services,” he says.
Banks opening up services to other companies
Salampasis doesn’t see any risk to incumbent banks from the embedded finance trend, for instance the risk that they become providers of “white label” commoditised banking services. Instead, he believes the trend will provide new distribution channels and lower customer acquisition costs.
“We are moving into a space where a single company does not have to be present across the entire value chain and doesn't have to own the entire product/service offering,” he says.

Banks and other financial services providers are shifting from being the gatekeepers of their services to opening them to facilitate an ecosystem of services.

Super-Rewards makes use of BPAY APIs to embed the super fund contribution service into the shopping experience. These include the Retrieve BPAY Biller Details, Validate BPAY Payment, and Generate BPAY Batch File APIs. 

When the customer instructs which super fund they would like the contributions to be made to, Super Rewards uses the BPAY APIs to validate the fund, as well as the customer’s reference number, before the payment is made.
“When we were building Super-Rewards we discovered that there was no database or no infrastructure in Australia which contains all the voluntary payments details of all the funds,” Helyar-Moray says.
“We've leveraged the BPAY APIs and that infrastructure to allow us to make the payments to thousands of users each month in a single transaction.”

Learn more about BPAY Group’s Developer Portal and BPAY APIs here.
Published by BPAY Pty Ltd (ABN 69 079 137 518) email: marketing@bpay.com.au. The BPAY Scheme is managed by BPAY Pty Limited.  When you use BPAY payment products, the BPAY Scheme is paid fees relating to processing costs and BPAY Scheme membership.  Contact your financial institution to see if it offers BPAY payment products and to get the Product Disclosure Statement.  Any financial product advice provided by BPAY Pty Limited in relation to BPAY payment products is general advice only and has been prepared without taking into account your objectives, financial situation or needs.  Before acting on such advice, you should review the Product Disclosure.

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