1、IBM Institute for Business Value|Expert InsightsIBM Institute for Business Value Embedded finance The voice of the makers 2IBMModern financial institutions demand modularity,security,openness,AI-driven capabilities,and collaboration on a hybrid cloud.At IBM,we empower you to elevate customer experie

2、nces,modernize core banking infrastructures,pioneer innovative payment solutions,and transform enterprise risk management.Learn more at institutions use BIAN as a starting point to help define and organize their IT software and services needs in a standard,rationalized way around the BIAN service la

3、ndscape.This in turn increases the agility of the organization to deliver the needs of its business.BIAN provides an industry model for creating an architectural framework that makes integration of software and services capabilities easier and faster through a standard set of definitions.The model i

4、s supported by 250 pre-defined APIs.Learn more at bian.org.Red HatBanks need modern platforms and approaches to compete in our ever-changing world.Red Hat helps to simplify operations,accelerate delivery,and unlock new revenue streams across any cloud environment.Learn more at we can help1Although b

5、anking is one of the oldest industries in the world,a new generation of financial thinkers and makers is reimagining the conventional bank.Empowered by technology and a youthful hunger for change,theyre determined to make banking easier,more accessible,and more impactful for individuals and business

6、es across the financial spectrum.Their modus operandi is embedded finance,a nascent yet growing banking approach with transformational potential that is sowing seeds of significant opportunity not only for banks,but also for their wholesale and retail clients.Their vision couldnt come at a better ti

7、me.Socially and economically,the world is becoming progressively more digital and interconnected.End consumers are rapidly adapting to technology while small and medium-sized businesses are developing a growing appetite for seamless access to financial services.A new way to bank2FIGURE 1Not a nice-t

8、o-haveEmbedded finance is now central to 1 in 4 banks business strategies.30%Its an initial bet46%Its complementary24%Its coreQ:How important is embedded finance as part of your overall business strategy?Source:Embedded finance:Creating the everywhere,everyday bank.IBM Institute for Business Value.S

9、eptember 2023.Yet,amid complex macroeconomic conditions that challenge traditional banking revenue models,they can extract new business value by eliminating friction both across and within entire industry verticals.In the process,they can redefine banking as we know it.Digital-savvy financial instit

10、utions are pragmatically investing in business culture transformation,new operating models,and exponential technology to future-proof their business foundations on digital platform economies.The ubiquity of mobile access has afforded financial institutions with the proximity needed to stay relevant

11、at the time and location of their clients needs.Institutions are leveraging secured APIs on banking-as-a-service(BaaS)architectures to integrate with third-party engagement models.Its therefore no surprise that 70%of banking executives say embedded finance is either core or complementary to their bu

12、siness strategy,not just an initial bet(see Figure 1).Financial institutions are struggling to keep pace.While the term“embedded finance”may be a recent addition to our lexicon,its not novel.For decades,banking customers have been able to access financial products on non-banking channels and with no

13、n-banking partners.Whats new is the radical shift in the way clients consume banking and insurance services in the moment and location of their need.In collaboration with Red Hat and the Banking Industry Architecture Network(BIAN),the IBM Institute for Business Value(IBV)has conducted extensive mark

14、et research on this strategic topic.We surveyed 12,000 consumers worldwide to understand changes in habits and preferences related to consuming financial services via in-person or digital channels.We also surveyed 1,000 executives working in retail and wholesale banking to learn how their institutio

15、ns are responding to embedded finance opportunities.3Enriching this research is a series of thought-provoking conversations with a panoply of experts and makers whose commentary substantiated our research by grounding it in everyday business reality.They shared their personal perspective from privil

16、eged viewpoints inside and outside financial services.These insightful dialogues shed light on the opportunities and challenges that embedded finance brings to the banking industry,to non-banking partners,and to fintech and techfin competitors.We conducted in-depth interviews with 17 subject matter

17、experts who are leaders in their field:Across our conversations with this diverse international ecosystem of experts,six themes are recurrent:decoding embedded finance;the tension between short-term ROI and long-term vision;modern architecture and exponential technology;risk and compliance issues;ch

18、anging customer expectations;and the inertia of existing culture and mindset.In the following report,we share the interviews we conducted with our experts,preceded by an executive summary with highlights that link them across the six recurrent themes.Bancolombia:Maria Cristina Arrastia Uribe,Busines

19、s Vice PresidentBBVA:Carmela Gmez Castelao,Head of Open BankingBradesco:Fernando Freitas,Head of InnovationDBS Hong Kong and China:Alfian Sharifuddin,Head of Technology and OperationsDOKU:Sujit Unni,Growth AdvisorEnel:Giovanni Vattani,Global Customer OperationsHSBC:Shayan Hazir,Chief Digital Officer

20、 for ASEANING:Brendan Donovan,Global CIO of Wholesale BankingLloyds Banking Group:Jasjyot Singh,CEO,Consumer LendingMizuho Bank:Andy Nam,CIO for Asia and OceaniaRaffles Medical Group:Quek Sin(QS)Kwok,Chief Digital OfficerRaiffeisen Bank International:Sudip Khan,Open Banking LeaderSEB:Christoffer Mal

21、mer,Head of SEB Embedded FinanceStandard Bank:Jorg Fischer,Group CIOStarling Bank:Sam Everington,CEO,Engine by StarlingStripe:Kevin Dowling,Head of Partner Solution Engineering for EMEA and APACUnipol:Giacomo Lovati,Chief Beyond Insurance OfficerBMO Financial Group:Lawrence Wan,Chief Architect and I

22、nnovation OfficerJPMC:Timothy Ness,Vice President and Senior Manager,Digital and Open BankingTD Bank:Gina Stille,Vice President of Business ArchitectureUOB:Arvid Swartsenburg,Head of Digital Strategy and TransformationWells Fargo:Steve Hagerman,CIO for Consumer TechnologyFive more esteemed experts f

23、urnished valuable insights:34Decoding the significance of embedded financeDecoding the significance of embedded financeUnlocking value through strategic long-term visionThe indispensable role of modern architecture and exponential technologyPromoting industry standards to mitigate ecosystem risk and

24、 compliance hurdlesThe rising tide of customer expectations in todays marketOvercoming cultural and mindset inertia to enable transformationDelve deeper with banking expertsFor many institutions,embedded finance has slowly transitioned from being a visionary buzzword to being a tangible reality.In t

25、hose institutions,embedded finance is impacting the way financial services executives define their business.As UOBs Arvid Swartsenburg asserts,“Embedded finance has already found its place in many real-life scenarios.”Executives across all latitudes concur that embedding financial services in the co

26、ntext of clients personal and business lives is indispensable.Unlocking the value of customer data and being relevant in the moment and location of need strengthens client relationships and helps secure a competitive edge.Referring to Unipols car insurance and mobility business,Giacomo Lovati unders

27、cores this success with the value of customer data:“Understanding our customer movements allowed us to enter new markets.”Capturing behavioral data informs approaches to constructing ecosystem-based value propositions.Thats why Starling Banks Sam Everington portrays embedded finance as a tool for ba

28、nks to be more proactive and responsive to their clients needs.“Ultimately,embedded finance is access to another distribution channel for the bank,finding people in those moments of real need.”Contents5And embedded finance is more than a fad.Lloyds Banking Groups Jasjyot Singh reinforces that:“Embed

29、ded finance is not a passing trend.It broadens the ways to engage with other people who are not just stand alone consumers and businesses.”This highlights how embedded finance opens doors for banks to connect with a diverse range of individuals,transcending traditional consumer and business boundari

30、es.But embedded finance cannot flourish in isolation.The whole organization must share in the vision and adapt by instantly enabling risk management,expanding compliance beyond traditional firms borders,onboarding new talent on a transformed operating model,improving merchants engagement,and redefin

31、ing clientsas well as what it means to serve them.Enels Giovanni Vattani also reminds us that financial institutions must expand their thinking beyond transactional terms.He suggests that embedded finance encompasses more than product definitions and can revolutionize the whole relationship between

32、banks and partners.“Its about co-creating new solutions that truly enhance the client journey.”Indeed,embedded finance isnt just about disseminating products.Its also about collaborating with partners to devise innovative solutions that significantly improve the client experience.“Embedding financia

33、l services capabilities such as lending.changes the paradigm for merchants from a way to sell products to a place to grow their business,”DOKUs Sujit Unni says.He underscores the ongoing need for active involvement and tailored assistance during the entire business journey,making certain that the fi

34、nancial solutions incorporated offer custom-fit benefits and long-term value for each unique enterprise.These insights from Swartsenburg,Lovati,Everington,Singh,Vattani,and Unni bring into sharp focus the transformative impact for entire industries.Embedded finance is much more than just a new produ

35、ct-offering platform.Its about fostering collaborative relationships and co-creating solutions that uplift the client experience.Additionally,it empowers banks to engage with a wider spectrum of stakeholders,breaking away from the confines of traditional customer segments.Embedded finance opens door

36、s for banks to connect with a diverse range of individuals,transcending traditional consumer and business boundaries.6Unlocking value through strategic long-term visionIt is clear that embedded finance is a long-term strategy made of intermediate value-generating checkpoints.As Mizuho Banks Andy Nam

37、 puts it:“Banks have an advantage over fintechs in some aspects,such as clients recognize the value of an established relationship that is based on trust and reliability.But this trust is not to be taken for granted,as clients have learned to look elsewhere for convenience.This is the reason why inc

38、umbents cant stand still but must learn how to work with other financial institutions and non-banking partners.”Decoding the significance of embedded financeUnlocking value through strategic long-term visionThe indispensable role of modern architecture and exponential technologyPromoting industry st

39、andards to mitigate ecosystem risk and compliance hurdlesThe rising tide of customer expectations in todays marketOvercoming cultural and mindset inertia to enable transformationDelve deeper with banking expertsBanks must shift from a tactical mindset to review short-term gains and pains as part of

40、a more long-term,strategic journey.“If the focus is on the end game,banks might never get started,”explains Singh,who says institutions must strike the right balance between short-term value and long-term viability.On that note,its essential to enable a value office to engage all parties and build a

41、 shared value-generation perspective that reconciles short-term expectations with long-term sustained value.This perspective should be based on a well-defined business product taxonomy and the alignment of goals across the organizationincluding external partners.Its important to integrate,if not rep

42、lace,transactional measures with a different business expectation that prioritizes the depth and quality of relationships with clients as markers of success.HSBCs Shayan Hazir accentuates banks need for a new strategic approach.“To effectively navigate these changes and capitalize on the opportunity

43、,banks must embrace a strategic mindset and build the necessary infrastructure.”He emphasizes the need to adopt a proactive and long-term approach to adeptly maneuver the changing dynamics of embedded finance.In a separate but complementary view,Vattani observes,“Beyond acquiring standard services t

44、hat are already in place,it is essential to perceive a will to co-create and innovate new services.”His comments underscore the importance of adopting a client-centered perspective that is integrated across the organization.Contents7Also necessary are strong leadership and collaboration,which can he

45、lp institutions stay the course on multiyear journeys.“We could have easily chosen not to change and to do banking in the traditional way,”says DBSs Alfian Sharifuddin.Fortunately,we didnt do that.Its not just vision.Its real people who made it happen.”In light of the perspectives shared by Nam,Sing

46、h,Hazir,Vattani,and Sharifuddin,its evident that the effective integration of embedded finance involves more than superficial business and technical modifications.Success requires a transformed,multifaceted business view encompassing impact to financial management,depth of customer engagement,volume

47、 growth,activity rates,and compliance fulfillment.In the world of BaaS offerings,resilience is vital.“The sustained success of embedded finance initiatives should not be deter mined by revenue alone,”notes Raiffeisen Bank Internationals Sudip Khan,who emphasizes that increased engagement with end cu

48、stomers also should be considered.He underscores the significance of a customer-centric focus and the development of meaningful interactions and experiences.While financial products evolve at a slow pace,customer needs and preference are more dynamic.As the pandemic demonstrated,they can swing wildl

49、y,forcing banks to move quickly to remain client-centric.Bradescos Fernando Freitas further emphasizes the characteristics of effective embedded finance:“Successful deployment goes beyond the realm of technology.It encompasses a rich understanding of the commercial landscape,which needs to be consid

50、ered as we forge ahead with technological innovation.”This sentiment highlights the importance of integrating business acumen with technological proficiency throughout the implementation process,helping ensure that the developed solutions not only possess advanced functionalities,but also address ma

51、rket demands and business intricacies in a way that provides lasting value.Embedded finance also unlocks relevant value in the risk management domain.A bank can better manage its risk appetite by leveraging new data and fostering a more direct relationship between the financial services it provides

52、and its end clients in the context of their personal and business journeys.To attain success,financial institutions must consider more than financial metrics alone,according to Freitas and Khan.They also must prioritize speed of development,depth of customer engagement,architectural innovation,and c

53、ollaborative endeavors.By emphasizing these multidimensional facets,banks can deliver resilient,customer-centric embedded finance solutions that meet customer expectations and drive growth.This comprehensive approach helps ensure that embedded finance initiatives deliver value not only to the banks

54、themselves,but also to their end customers.8The indispensable role of modern architecture and exponential technologyIn institutions that embrace embedded finance,business lines leverage technology to engage with clients and partners in new ways.Investing in modern infrastructure and architectures is

55、 a key priority.This requires utilizing large-scale platforms,improving API capabilities,modernizing core systems,and adopting architectural principles that promote flexibility and scalability.Decoding the significance of embedded financeUnlocking value through strategic long-term visionThe indispen

56、sable role of modern architecture and exponential technologyPromoting industry standards to mitigate ecosystem risk and compliance hurdlesThe rising tide of customer expectations in todays marketOvercoming cultural and mindset inertia to enable transformationDelve deeper with banking expertsAs Wells

57、 Fargos Steve Hagerman reminds us,“Technology-only solutions will never be enough;your architecture must be synonymous with a clear business product taxonomy.”This implies that an organizations technological framework should seamlessly integrate with its strategic goals and product offerings.“Bankin

58、g isnt as straightforward as digitalization,simplicity,and instant access to credits and debits.To succeed in the new realm of digital marketplaces and embedded finance,time to market is of the essence.The banking industry and regulators must continue to lower the barriers that slow progress,”explai

59、ns INGs Brendan Donovan,who underlines how important it is that banks invest in up-to-date technological infrastructure to promote flexibility,scalability,and interoperability.Contents9This perspective accentuates the significance of aligning financial acumen with tech savvy,reinforcing the notion t

60、hat integrating finance and technology requires partners who are inherently adaptable and forward-thinking.Being ready for seamless financial interactions is critical,according to Stripes Kevin Dowling.“Money movement doesnt happen in isolation.Being agnostic and API-first enables you to embed payme

61、nts rapidly wherever partners see the next use case emerging.”BMOs Lawrence Wan similarly refers to the importance of architectural thinking.“I would distill everything into speed.To be fast you need to be much more thoughtful,and thats where the concept of architecture comes in.”Echoes Vattani,“Wha

62、t matters is time to market,which is monitored very carefully.That means finding not only the best technical solution,but also the partner capable of accompanying integration and development quickly.”Paired with their peers perspectives,the insights offered by Hagerman,Donovan,Dowling,Wan,and Vattan

63、i is evidence of the industrys collective agreement that investing in technology and making thoughtful architectural choices is crucial for unlocking the potential of embedded finance and fostering innovation in the banking sector.These considerations not only support practical implementations,but a

64、lso lay the groundwork for continuous innovation and adaptation within the banking industry.Investing in technology and making thoughtful architectural choices is crucial for unlocking the potential of embedded finance.10Promoting industry standards to mitigate ecosystem risk and compliance hurdlesD

65、ecoding the significance of embedded financeUnlocking value through strategic long-term visionThe indispensable role of modern architecture and exponential technologyPromoting industry standards to mitigate ecosystem risk and compliance hurdlesThe rising tide of customer expectations in todays marke

66、tOvercoming cultural and mindset inertia to enable transformationDelve deeper with banking expertsFuture-proofing banks with embedded finance strategies is about not only technology and business solutions,but also compliance posture and adherence to industry standards.After all,banking is a trust-ba

67、sed industry that is built on regulation.“Trust is the key issue,and trust is not just a cool brand,”says BBVAs Carmela Gmez Castelao.Trust is especially important in light of shifting markets and the rise of new use cases that leverage exponential technology.In fact,we encountered a broad consensus

68、 in our conversations:its important to create trust by embracing radical transparency in data protection and by building continuous alignment with regulatory bodies.Europe sits at the forefront of regulatory discussions about standards and compliance both inside and beyond financial services.“Its ti

69、me to think about how to unlock the potential of embedded finance beyond open banking.The technology is here,but what is missing is standardization,”Vattani says.TD Banks Gina Stille refers to the importance of having a common taxonomy across stakeholder groups.“What language do we all want to speak

70、 together?”she asks.“We dont want to just speak a common language internally;we want to be able to speak a common language externally with service providers.And if we think about open banking and all the reasons why we are going to be able to interact with other third parties,it makes sense for us t

71、o go with an industry standard.”Contents11JPMCs Timothy Ness echoes the importance of common standards.“Selfie is the only word that is the same across the globe in all spoken languages.The nut to crack is to build a common language across the enterprise.”He underlines the value of effective communi

72、cation and mutual understanding within an enterprise and driving home the need for a universally comprehensible“business language.”And recognizing that European regulation kickstarted open bankingnow evolving into embedded financeand a broader debate about API standards,Khan welcomes regulation.“To

73、speed things up,more regulation is welcome.”These reflections from Castelao,Vattani,Stille,Ness,and Khan underscore the importance of finding a common ground for integration and collaboration within financial services and across open banking gates.This extends beyond mere compliance.It delivers busi

74、ness value by fostering efficiency and accelerating time to market by creating integrated systems and frictionless services.Its important to create trust by embracing radical transparency in data protection.12The rising tide of customer expectations in todays marketDecoding the significance of embed

75、ded financeUnlocking value through strategic long-term visionThe indispensable role of modern architecture and exponential technologyPromoting industry standards to mitigate ecosystem risk and compliance hurdlesThe rising tide of customer expectations in todays marketOvercoming cultural and mindset

76、inertia to enable transformationDelve deeper with banking expertsThe goal of embedded finance is eliminating ecosystem friction by offering services when and where customers need them,at convenient prices,within secure digital frameworks.Financial institutions that want to achieve this goal understa

77、nd the need to prioritize customer engagement by embedding services into seamless user journeys orchestrated by diverse third-party associates.This customer-first approach demands a shift of financial engineering toward simplicity,with a strong technical foundation that helps ensure an effortless ex

78、perience for both distributors and customers.It is grounded in a profound comprehension of different customer needs and segmentation to align and balance the delivery of client value between banks and non-banking partners.An exceptional user experience is foundational.“Providers of embedded finance

79、must be obsessed with the user experience of distributors,”says SEBs Christoffer Malmer.Raffles Medical Groups Quek Sin Kwok discusses how embedded finance can improve the user experience in the fields of payments and healthcare financing,in particular.“Addressing this challenge is crucial to enhanc

80、e the user experience,”he says.“It is crucial to extend user support beyond these moments and provide ongoing guidance to individuals and their families.”This underlines the necessity for persistent support and guidance throughout the customer journey,helping ensure that the solutions offered via em

81、bedded finance meet the unique needs of users and offer sustained value.Contents13Standard Banks Jorg Fischer stresses the importance of a purposeful,client-oriented approach in the platform business.“Organizations need to operate with a clear purpose while also finding a feasible commercial model a

82、s they step into the platform business,”he says.“Banks need to be truly client-centric and think about the day in the life of the client,not the day in the life of a bank.”This highlights the shift from a bank-centric perspective to one that places the customer at the heart of operations.Only adopti

83、ng a holistic perspectivetearing down data barriers among lines of business and industriescan foster real and effective client centricity.“Focusing on customer relationships means understanding the needs of clients holistically,”explains Bancolombias Maria Cristina Arrastia Uribe.“Solving their need

84、s holistically means going beyond financial services,because they dont wake up dreaming of a mortgage.They wake up dreaming of a new home.”By internalizing a customer-focused mindset,banks can craft user journeys that place simplicity,convenience,and value at the forefront.Seamless partnerships with

85、 third-party entities and continued support beyond particular touchpoints enhance the overall user experience.These insights from Malmer,Kwok,Fischer,and Uribe emphasize that a customer-centric approach allows banks to meet their customers evolving needs,providing them with consistent value througho

86、ut their financial journey.Seamless partnerships with third-party entities enhance the overall user experience.14Overcoming cultural and mindset inertia to enable transformationDecoding the significance of embedded financeUnlocking value through strategic long-term visionThe indispensable role of mo

87、dern architecture and exponential technologyPromoting industry standards to mitigate ecosystem risk and compliance hurdlesThe rising tide of customer expectations in todays marketOvercoming cultural and mindset inertia to enable transformationDelve deeper with banking expertsBased on our dialogues w

88、ith industry executives,its clear to see that banks need a new mindset and a cultural transformation to flourish in the world of embedded finance.This requires embracing change,empowering employees,and establishing partnerships that break down conventional barriers,all centered on sustained growth.S

89、ingh advocates for aligning interests and priorities rather than making structural adjustments.“I have always believed that structures,in themselves,do not have a significant impact.We all get super excited by boxes on a piece of paper.What really makes a difference is the alignment of interests and

90、 alignment of priorities.”A successful change in operating model encompasses the way of working,how incentives are built,and how technology is deployed and accessed in the development process.Banks must act as technology-first companies,according to Malmer.“What we are building with embedded finance

91、 and BaaS is effectively a software product.We must operate as a software development organization,which is something totally different than a traditional bank.”Banks should therefore adopt an agile and innovative mindset similar to that of software development organizations to excel in the changing

92、 landscape of embedded finance.Contents15Everington echoes this perspective and highlights that what matters is building teams that are receptive to change and ready to grab market opportunities,placing trust in and enabling the bright minds spearheading technological advancements.“You have to trust

93、 and empower smart individuals without necessarily knowing what youre going to get and in what time frame.”This emphasizes the need to create an atmosphere thats conducive to innovation,collaboration,and adaptability.By empowering talented individuals and embracing their ideas,banks can stay ahead o

94、f the curve in technology and provide innovative solutions in embedded finance.Castelao also stresses the significance of workforce development.“Funding and development of embedded finance will only materialize if we seriously consider the changing behavior of our clients,and therefore the change in

95、 peoples skills.”She highlights the importance of upskilling employees and aligning their capabilities with the emerging demands of embedded finance.It calls for a proactive approach to cultivating talent,promoting continuous learning,and adapting to industry dynamism.The perspectives shared by Sing

96、h,Malmer,Everington,and Castelao suggest that embedded finance requires banks to cultivate a culture that encourages innovation,adaptability,and collaboration.By embracing a software development mentality,investing in employee skill development,and preemptively addressing the evolving needs of clien

97、ts,banks can successfully navigate the transforming landscape of embedded finance,stimulate sustainable growth,and offer superior value to customers.By empowering talented individuals and embracing their ideas,banks can stay ahead of the curve in technology.16Delve deeper with banking expertsOur con

98、versations with industry experts and makers confirm that financial institutions can successfully complete the journey to embedded finance.However,doing so requires a complex interplay of adaptation and adoption,harnessing the transformative potential of embedded finance to create enduring value.The

99、path isnt easy,but it can be rewarding.To fully understand what embedded finance is today and how it can shape the future of financial services,continue reading for full-length interviews with our experts.As you ingest their insights,keep in mind the thematic pillars that weve just highlighted:Decod

100、ing the significance of embedded finance Unlocking value through strategic long-term vision The indispensable role of modern architecture and exponential technology Promoting industry standards to mitigate ecosystem risk and compliance hurdles The rising tide of customer expectations in todays marke

101、t Overcoming cultural and mindset inertia to enable transformationUsing these as the foundation for your learning will help you connect the dots among this diverse set of intriguing perspectives,thereby turning our experts collective wisdom into a plan of action for pursuing the many fruits of embed

102、ded finance.Decoding the significance of embedded financeUnlocking value through strategic long-term visionThe indispensable role of modern architecture and exponential technologyPromoting industry standards to mitigate ecosystem risk and compliance hurdlesThe rising tide of customer expectations in

103、 todays marketOvercoming cultural and mindset inertia to enable transformationDelve deeper with banking expertsContents17The platform economy has transformed how consumers experience the digital world,with dramatic implications for financial institutions.Learn how banks can serve their clients whene

104、ver and wherever a financial need may arise.Embedded finance is essential for modern banking strategies.70%of banking executives say embedded finance is either core or complementary to their business strategy.Ecosystem-based business models are rising.Financial institutions are increasingly investin

105、g in the platform economy,with 20%of organizations already offering embedded finance solutions.Yet,bank executives priorities dont align with consumer demands.Bankers underappreciate the value of mobile wallets,personalized rewards,and satisfying customer services.Monolithic architectures and proces

106、ses hinder banking ambitions.Foundational gaps in modernization and API standardization are hampering embedded finance outcomes.Privacy and security challenges slow innovation across open ecosystems.CEOs of financial institutions cite privacy and cybersecurity as the top two barriers to generative A

107、I deploymentmore than CEOs from any other sector.Embedded financeCreating the everywhere,everyday bankLearn more about embedded finance by reading our main research report:ibm.co/embedded-finance18BMO Financial Group Lawrence Wan*Chief Architect and Innovation OfficerJPMC Timothy Ness*Vice President

108、 and Senior Manager,Digital and Open BankingBancolombia Maria Cristina Arrastia Uribe Business Vice PresidentBBVA Carmela Gmez Castelao Head of Open BankingBradesco Fernando Freitas Head of Innovation DBS Hong Kong and China Alfian Michael Sharifuddin Head of Technology and Operations DOKU Sujit Unn

109、i Growth Advisor Enel Giovanni Vattani Global Customer Operations ING Brendan Donovan Global CIO of Wholesale BankingLloyds Banking Group Jasjyot Singh CEO,Consumer Lending Mizuho Bank Andy Nam CIO for Asia and Oceania HSBC Shayan Hazir Chief Digital Officer for ASEAN Our conversationsThe conversati

110、ons with our experts have been edited for clarity;all opinions expressed therein are the experts personal opinions.*Provided quotes only;no interview available19TD Bank Gina Stille*Vice President of Business ArchitectureWells Fargo Steve Hagerman*CIO for Consumer TechnologyUOB Arvid Swartsenburg*Hea

111、d of Digital Strategy and TransformationRaiffeisen Bank International Sudip Khan Open Banking Leader SEB Christoffer Malmer Head of SEB Embedded Finance Standard Bank Jorg Fischer Group CIO Stripe Kevin Dowling Head of Partner Solution Engineering for EMEA and APAC Unipol Giacomo Lovati Chief Beyond

112、 Insurance Officer Raffles Medical Group Quek Sin(QS)Kwok Chief Digital Officer Starling Bank Sam Everington CEO,Engine by Starling Our conversationsThe conversations with our experts have been edited for clarity;all opinions expressed therein are the experts personal opinions.*Provided quotes only;

113、no interview available20 BancolombiaMaria Cristina Arrastia UribeBusiness Vice PresidentThe transition to embedded finance in the banking industry marks a strategic evolution,focusing on enhancing customer experiences and maintaining relevance in an increasingly digital marketplace.Such a transforma

114、tion requires overcoming internal alignment challenges and nurturing a culture of collaboration with third parties to offer more holistic,customer-centric solutions.In this conversation with IBMs Paolo Sironi,Bancolombias Maria Cristina Arrastia Uribe discusses a future financial landscape thats dem

115、ocratized and hyper-personalized,with banks evolving into platforms that provide a diverse array of services.How is Bancolombia thinking about embedded finance?Historically,we have been a very transactional bank,gaining access to many touchpoints with clients.We started asking ourselves how we could

116、 improve quality and value of client engagement.As we chose a platform model for the development of our bank strategy,we started integrating third-party services on our digital channels and exposing API solutions on our platform.The variety of our API-led ecosystem provided multiple engagement point

117、s and user journeys through our channels,which at the same time allowed us to solve client needs holistically.We learned a step at a time the value of providing financial services to our clients also via competitors proportions with the goals to always help our clients to develop their businesses or

118、 fulfill their personal goals.This strategic imperative has facilitated numerous internal conversations that were initially challenging the bank.Initially,many colleagues didnt grasp the strategic value of our ideas.But as we started explaining the concept and the purpose,it became easier for us to

119、gain acceptance.What is your perspective on embedded finance?To begin with,it is crucial to grasp the significance of our strategic definition of embedded finance,as it serves as the cornerstone of our journey.Just over five years ago,we made the customer relationship our primary objective and decid

120、ed to work around five segments:individuals,freelancers,SMEs,companies,and corporates.Focusing on customer relationships means understanding the needs of clients holistically.The word“holistic”carries a lot of weight if you want to solve client needs.Solving their needs holistically means going beyo

121、nd financial services,because they dont wake up dreaming of a mortgage.They wake up dreaming of a new home.We worked on individuals needs,such as daily life,mobility,environment,retiring,and protecting inheritance.And we worked on companies needs,including evolution,growth,transformation,and optimiz

122、ation of their business.Given that context,art begins.And thats where technology starts.21 Bancolombia Maria Cristina Arrastia Uribe,Business Vice PresidentDo you think banks lose relevance with embedded finance?On the contrary.It is by building our own ecosystem and exposing third-party services th

123、at our bank remains relevant.We prefer to overlap than to leave gaps in the market,obsessive about developing methods of payment and collection.We cannibalized ourselves and didnt care.And what is more important:our purpose.We believe that this is something good for customers,so we do it.What is the

124、 next bet the bank must make so that it continues to be relevant to customers every day?Embedded finance doesnt take away from your strategy.It is additive because the digital channels that have relevance can be your competitors,but they are also your corporate clients.The strategy worked for us,bec

125、ause in the last five years we added 48%of new clients.Today,56%percent of banking transactions from the Colombian market go through Bancolombia,and such a transactional share helped us to defend our relevance and grow it.Whats the challenge in aligning the business,the technology,and the control fu

126、nctions when third parties are involved?I would say its a perfect marriage.When we started five years ago,we also adopted agile as a work methodology combining business and technology.It hasnt been easy.Some areas were transformed,and some were causing friction because there was no strategic underst

127、anding and alignment.Friction became evident in the middle of the pandemic.But we felt committed to scale agility in the organization,with each tribe pairing a technical and a functional leader aligned on the strategy with the same KPIs.We also learned the importance of including a security and cybe

128、rsecurity leader in each tribe.After much work,the tribes now work with the same objectives and are very synchronized.Certainly,we continue to refine our strategy,but we are all aligned on the same goals and performance measures where security,profitable growth,and customer experience are the pillar

129、s.There can still be friction,as in every marriage,but all parties work and row at the same time.A good operating system is difficult to achieve.A very important topic is the banks way of working and how core technology,business,and control functions are working in tandem.In the context of embedded

130、finance,how do you see the banking core operations working,and how would you measure success?As a 155-year-old bank,legacy accompanies us.But we didnt sit back and wait for the perfect technology to improve our business.We developed new platforms and new architectures integrating with the technology

131、 we have.Right now,we are a little ambidextrous.We are in both worlds.The central element is that any new solution had to be part of a process of“amplifying”the whole bank.While we operate on our original core and more modern platform solutions supporting embedded finance,we also started migrating t

132、o the cloud.That is easier said than done because its necessary to uncouple many things that were coupled due to their history.Innovation comes with new risks and refreshed compliance.The open banking and open data movement helped to add clarity in our journey via the definition of standards to make

133、 our APIs more easily accessible.22 Bancolombia Maria Cristina Arrastia Uribe,Business Vice PresidentWhat are your main embedded finance use cases?We generated great traction in embedding payments with the launch of our QR solution and the integration with our client ecosystem.And we introduced a ho

134、using finance solution.Currently,we are expanding with digital wallets to enable clients with easier handling of their bank accounts.Is there a perfect partner to accelerate your strategy?First of all,we look for partners with the same level of ambition,a portfolio of products having the functionali

135、ties needed,and shared values and principles.A good partner is not necessarily the fastest one,but the one guaranteeing our business sustainability over time with a good level of support.What would be the success factors?There are four factors:have a clear strategy,understand that this is a business

136、 done in cooperation with third parties,become expert in key capabilities,and change mindset.First,there cannot be success without a clear definition of embedded finance.Second,all must keep an open mind to run a new way of doing business in which there is a high level of collaboration with third pa

137、rties that are often also competitors.Success is based on shared work methodology,ambition,values,functionalities,and experience.Third,I think that for us it has been a winner to be very consistent,coherent,and persistent in that we have an API-led producer-consumer model that everyone understands.F

138、ourth,a change of mindsetof cultureis paramount.All colleagues must understand the reason for what we do,how to constantly do it,and how to do it with security.Where do you see the industry going next with embedded finance?Weve asked ourselves that question a lot.I think that in 10 years the bank wi

139、ll be very different from what it is today.We have a genuine purpose that moves us with everything we do.We want to work on sustainable development,seeking the well-being of society and people.The democratization of financial services means to give more access to more people,and help improving well-

140、being.How to do that?Banks will end up being a platform that exposes services for others to consume,where hyper-personalization becomes a fundamental thing for differentiation in the market.The first three years in our platform journey helped us prepare to succeed in a market in which the barriers a

141、nd borders among industries are over.23 BBVACarmela Gmez CastelaoHead of Open BankingIn a world that becomes socially and economically more interconnected,the expanding digital disintermediation of financial services heightens the opportunity to adjust traditional business models and harvest new val

142、ue at the intersection of banking with other industries.Across open banking,embedded finance emerges as a strategic enabler to discover new ways of accessing new client pools based on virtual proximity and digital convenience.Its no surprise that digital-savvy institutions like BBVAand their competi

143、tors operating outside financial servicesare pressing on embedded finance strategies.In this conversation with IBMs Paolo Sironi,BBVAs Carmela Gmez Castelao discusses all key aspects of embedded finance strategies.As a banker at the forefront of business model transformation,what is your understandi

144、ng of embedded finance?Banks have always looked to deliver products in a more convenient way for customers,like consumer finance through third-party agents in the physical world.This is what I call“traditional embedded finance.”What digital economy and open banking brings anew is the ability to do t

145、his in the digital world,which means convenience and immediacy for final customers.To what extent does the concern of losing customer relationships influence the preference of bankers between“traditional approaches to embedded finance”and“digital embedded finance,”such as utilizing agents for consum

146、er lending?Through embedded finance we are not losing the relationship with clients,but bringing the financial service to the place where clients are doing their daily journeys through an open funnel created in a third party.Client capture is much more expensive for banks than for e-commerce compani

147、es or travel websites.Embedded finance empowers us to attract a broader market and provide convenient access to financial products where the customer needs it and when the customer needs it.The customer-facing privileges are shared with our partners and the end customer relationship remains with the

148、 bank.Is the effectiveness of this funnel consistent across different client segments for example,retail clients,small and medium-sized businesses,and corporate clients?Retail and SME clients look for third-party portals where they conduct their day-to-day activities.This digital behavior allows us

149、to collaborate with third-party portals to make finance services available in the most convenient way.On the other hand,acquiring and managing relationships with large corporate clients is more complex and traditionally relies on professional services.Embedded finance enables these companies to digi

150、tally manage relationships,as business decisions occur in various contexts.I cannot imagine a treasurer of the future,who is now in university,not thinking of having embedded finance solutions for managing costs,taxes,accounting.Its something that is going to happen.24 BBVA Carmela Gmez Castelao,Hea

151、d of Open BankingWhats the appropriate first step when embarking on an embedded finance journey,and what potential pitfalls or actions should be avoided along the way?The first step is carefully identifying which verticals to serve.This is essential to design a customer-centric approach.The partner

152、helps you understand deeply the vertical you want to tackle,and that will lead to the creation of products that will serve their customers better,bringing the necessary financial solutions into client journeys and events.In some sectors,its not easy to gain that level of customer understanding to le

153、verage financial needs if you dont have the full context.Thats the main value of embedding finance now.Thats the main value of partnering.You said partners,not buyers.Is embedded finance about exposing APIs for a third party that consumes them autonomously?Or is a partnership model necessary?I think

154、 learning how to partner is the main value that embedded finance brings to the industry.Many companies which dont aspire to become banks want to offer excellent financial solutions inside their client journeys.Simultaneously,many banks strive to target these companies customers,who are unlikely to v

155、isit the banks website.So,partnering is a win-win for everyone.One of the first things you need to dothe one step you need to get rightis understanding which partners you want to work with,and what is the value that we can jointly offer to the final customers.This is not about one big business case

156、or building a product that suits just one big client.This new way of banking needs to grow with small learning steps which will help us adjust systems and services and transform processes as a whole.Connecting to clients outside banks traditional perimeters has many challenges in terms of processes

157、and contracts.To play that back,your main point is that banks need a long-term strategy,and opportunistic approaches wont enable banks with the foundations they need to build for the future?Thats right.In their pursuit of catering to small business clients,banks run the risk of overlooking critical

158、elements that may emerge later and potentially strain the client relationship.This is a common mistake that arises when delving into the realm of embedded finance.Neglecting to grasp the strategic understanding of the overall context in which clients operate is like setting up mobile banking just as

159、 one service on a little mobile screen instead of a bigger laptop screen,and forgetting to consider business continuity,new vulnerabilities,need of tailored processes,and new approach to clients.25 BBVA Carmela Gmez Castelao,Head of Open BankingWhat is the most significant lesson learned from your e

160、xperience with embedded finance initiatives?I think the first lesson learned is about addressing regulators concerns and requirements.It has taught us a lot.European regulators,for example,have many fintechs talking to them about open banking,while many banks are fairly disengaged because they think

161、 they cannot monetize on open banking requirements.Current regulation does not allow fair play,does not promote standards,and does not motivate banks to invest in offering good-quality APIs.However,embedded finance is something that is going to happen.Its not only about disruptive innovation,but a j

162、oint transformation of the whole financial and non-financial ecosystem.All the community must have a voice in discussing future regulation.The second major learning is about data.I dont see yet many embedded finance solutions that are really leveraging data correctly either in the banking or non-ban

163、king world.How can we leverage data considering privacy,and how to explain to the customer for what are we going to use your data and which benefits will bring for them?And how are you going to get value here?Those are the main challenges I see looking forward.Banks have their own closed verticals,a

164、nd integrating embedded finance would inevitably intersect with these.Are you inferring that banks need to open up internally to effectively support an embedded finance system,and thus cater to external clients?Banks need to openor more than that,need to changethe way we have looked at financial ser

165、vices until now.Managing an internal customer funnel is not the same as helping partners manage their funnel,including the financial part of it.This requires not only a different sales approach much more based in discovering together with the partner what works well,but also a different approach to

166、sell banking products.A clear example is selling credit products.Learning how to use external data to improve the risk scoring could be very interesting for both,but the client consent to use their data is critical and needs to be managed.It could be very interesting for the partner because they wil

167、l have more satisfied customers.It could be very interesting for the final clients,because they will get more opportunities to finance their goods or whatever they are looking for.And,of course,its advantageous for the bank,as it drives more business.The question arises:How can we combine these thre

168、e elements?How do we explain to regulators the new models we wish to implement?How do we test these models in a regulatory sandbox to gain acceptance?Its essential to find a way to navigate these questions because managing risks in non-traditional financial ways requires careful analysis and conside

169、ration,and of course a different selling and operating approach.26 BBVA Carmela Gmez Castelao,Head of Open BankingIn the context of embedded finance,how important is the relationship between business and technology?Its not just business and technology.For me,its a square that considers business mode

170、ls,new technology,transformed processes,and secured access to data.Technology plays a crucial role in determining what can be done.I appreciate it when technical experts say that we can do anything,and its true.We do have endless possibilities.However,we must consider the cost,time frame,and associa

171、ted risks.At BBVA,we call these elements“shapers”which mold the development of technologyfor example,legal,compliance,risks.We as a business would love to do many things.We might have 25 ideas.Of those 25,maybe 20 are viable on technical terms.Fifteen more are excluded by regulatory or risk constrai

172、nt.And once we define the valuable use cases that remain,we need to consider how can we explain our value to the end users.Should banks adopt existing infrastructure to enhance embedded finance architectures?Or is it more advantageous to start from scratch with a greenfield approach?For years,weve h

173、ad a wide range of proprietary APIs that we use internally to access BBVAs back-end services.However,there is a major difference between internal use and exposing APIs externally to a non-owned channel.At BBVA we use third-party tools to facilitate API exposure and orchestration.But for us,the best

174、approach is a mix of both.Some banks may opt for a greenfield approach,aiming to start from scratch to avoid any constraints.While I understand the appeal of such a strategy from a business perspective,it also carries the risk of losing ground.As an incumbent,we possess a unique opportunity to lever

175、age our existing suite of value-added internal services.While smaller competitors may initially focus on one or two services in a greenfield setting,as incumbents we should adopt a long-term strategy aimed at embedding a wide range of financial products and solutions.A logical approach involves blen

176、ding new infrastructure with the modernization of our traditional core systems.To what degree does resolving talent and culture gaps help embedded finance initiatives succeed?The challenge in organizations is moving the whole structure to explore new ways of doing banking when they are happy with th

177、e business they do today.And as we discussed before,open banking requires a different approach to sales and operations.Funding and development of embedded finance will only materialize if we seriously consider the changing behavior of our clients,and therefore the change in people skills.We must con

178、sider the pace of their digital adoption as well as how they expect to interact with financial services within their digital experiences.I dont know if its going to take three,seven,or 10 years time.But I believe that banking as we know it today wont be there soon.Thats why we need to fund this tran

179、sformation now.Are the CEOs and boards commitments essential?Embedded finance wont be a reality at any bank without board and C-level commitment.27BBVA Carmela Gmez Castelao,Head of Open BankingWhat stands at the intersection between standards,regulation,and quality APIs?Regarding standards,PSD2 is

180、an excellent example.Many intermediaries build their business case by offering their own set of standards,which results in multiple conflicting standards in the industry.This affects the speed and clarity by which non-banking companies can embed financial services.The industry should agree upon a co

181、mmon set of standards to promote as a foundational component of embedded finance.In business history,I dont know of any case in which standards didnt help to grow businesses exponentially.Leading the competitive landscape are those who establish and control the standards,whether they are intermediar

182、ies or jurisdictions.Which regions do you perceive as being the most advanced in terms of embedded finance development?Asia is a leading market in embedded finance.The main reason is a combination of technology adoption by businesses,digital behavior of the population requesting financial services t

183、o be embedded,and regulation.Their banks want to be active players in the ecosystem.We talked about how critical the top-down mandate is to change the bank mindset to transform how products are developed and offered.There are also many examples in the US where smaller companies are offering embedded

184、 services.The US benefits from a single market with a single language,and the possibility to offer the same API functionality across many local states.Adequate ROI is more complicated in smaller markets like some Latin American countries,parts of Asia,or even Europe because of the need for passporti

185、ng from one country to another,which also takes time.Forward-looking regulation is also a key driver,and some countries such as Australia and Brazil are making fast inroads benefitting from all the lessons learned from countries who started earlier.One example of regulatory advantage is digital onbo

186、arding.Jurisdictions that enable small business representatives to utilize a power of attorney for online onboarding provide embedded finance players with a clear advantage.This allows clients to onboard and start utilizing services without friction.Otherwise,banks would need to maintain a dedicated

187、 registry for powers of attorney to facilitate onboarding for users from third-party companies.Given the central role of banks as trust agents,what factors contribute to a bank being perceived as more trustworthy?Can a cool brand alone suffice?Trust is the key issue,and trust is not just a cool bran

188、d.Financial education plays a relevant role to answer key questions such as,“Is my money safe?”In this regard,trust is a big asset for us.Our partners often choose to collaborate with BBVA because they recognize our strengths and the trust we instill in users when it comes to secure payments and ope

189、ning accounts.28 BBVA Carmela Gmez Castelao,Head of Open BankingWhen non-banking firms seek partnerships with banks to embed financial services into their client journeys,what do they value the most when selecting which banks to collaborate with?What the ecosystem of partners want is easy integratio

190、n,from clear technical documentation to state-of-the-art sandbox capabilities.They want monetization options as agents.And they also demand security and resilience.For example,systems must not fail on Black Friday,no matter how much the transaction volumes spike.What they demand is frictionless jour

191、neys for their clients.Banks are in the financial business,and partners are in another business;embedded finance is just a component of the journey.Turning the question around,what do banks value most about embedded finance partners?First,the value for the bank is opening the funnel to connect with

192、a cohort of clients who would never come to the bank website or app.Second,but not less important,partners provide better understanding of cohort needs,enhancing the banks capability to ideate new products or solutions that fit.Considering the time required to deliver value for most embedded finance

193、 initiatives,what is the most effective approach for reporting progress to top management?Embedded finance is not an easy journey,and it takes several levels of conversations to reach same understanding and strategic consensus.The best way to do this is demonstrating that clients are changing their

194、behaviors and want to do business through third parties.Half of existing clients of our embedded finance solutions are already BBVA clients,but the other half are clients that are difficult and more expensive to attract with traditional channels.You referred to embedded finance as a square made of b

195、usiness,technology,processes,and data.If we add the ecosystem,it becomes a cube featuring the interest of partners,lines of banking business,technology departments,and regulators.How important is the concept of value orchestrationand,furthermore,the construct of a value office taking center stage in

196、side this cube?It is more than relevant.This is critical.You must transform your way of seeing the market and the ecosystem.Unless you understand that you are part of that ecosystem,you cant grasp the potential value that embedded finance brings.29 BradescoFernando FreitasHead of InnovationAs entire

197、 economies go digital and foster new economic interactions among participants,banks are tasked with leveraging technology to change their commercial approaches.By embedding themselves into ecosystem platforms,they can create new distribution channels through third-party partnerships.Or they can leve

198、rage their full range of business expertise and technical capabilities to invest in orchestrating user ecosystems.Bradesco faced this new banking paradigm recently when it launched an agri-farm solution as a digital strategy to embed its added value into 50%of the Brazilian economy.In this conversat

199、ion with IBMs Paolo Sironi,Bradescos Fernando Freitas discusses his embedded finance experience at the inflection point of banking and entire economies.Whats your perspective on embedded finance strategies in the context of a well-established financial institution?The competition landscape is evolvi

200、ng,asking banks to excel on three fronts:First,banks develop their own financial products and solutions,distributing them through their channels.They constantly strive to enhance client experiences and align customer needs with added value.I would say that banks have a clear understanding about what

201、 works and what doesnt work with this approach.Second,banks see the value to complement their core services with third-party offers through business partnerships.Bancassurance is an example,in which banks integrate their portfolios with products which are not owned but are still adjacent to their ma

202、in business.Third,banks are asked to be way more accurate to meet client needs in the moment and location when client needs emerge.And here is where understanding embedded finance is really crucial,because banks would own the user journey yet need to be contextualized.How would a bank contextualize

203、its services in non-banking ecosystems?Embedded finance works on two levels.The first level is transactional:banking services can be directly coupled to the user journey on third-party platforms via secured API services.The second level is empowering:third parties dont only require access to an API-

204、enabled catalog of products.Some may seek to establish their own financial services operation and seek BaaS services to operate under a banking license.30 Bradesco Fernando Freitas,Head of InnovationAmidst all market opportunities and complexities,do you think there is a first-mover advantage?On the

205、 one side,every product owner inside a bank already understands that the distribution of their product cannot be restricted to the organizations channels and customers,but it needs to be consumable wherever clients are in their personal and business journey.That is why banks are investing to make al

206、l products consumable via APIs on digital marketplaces.A well-constructed API marketplace will make most banking consumable on-demand by third-party businesses and partners.Banks decide in different forms the level of openness or permission to access their API marketplace.On the other side,BaaS offe

207、rings can be more demanding,as they require deeper integration levels and more complex service-level agreements.This is where banks are acting more cautiously to understand how to better position.Is embedded finance a technology or a business strategy?An embedded finance strategy encompasses more th

208、an just technology.It also requires deep understanding of commercial elements that must be in place as the technology is developed.Most of our 500 APIs lie on a simple commercial structure for external consumption.And once all bricks and commercial structures are in place,it is relatively easy to bu

209、ndle for multiple case studies like collections of payments and through real estate credit.In general,our understanding is to have a technology that is extremely plug-and-play leveraging the resilience and scalability of the banks infrastructure and operations.Seamless scalability is essential for p

210、rocessing at scale because embedded finance is not limited to niche markets but extends to large-scale ecosystem engagement.Fintechs have been in this market for quite some time,and incumbent banks started making inroads more recently.The more the market grows,the more security,compliance,and high-q

211、uality accessibility become key and differentiating attributes.And that is what we target.Do banks fear losing the customer relationship when embedding into third-party user journeys?I dont think so.Essentially,banks already worked with their clients under someone elses brand and platform without fe

212、ar of losing strategic relevance.Think of private-label credit cards as an example.What they now understand is that new technology generates new opportunities and business models that can target new segments beyond payments.For example,large retail and telco companies are looking to provide financia

213、l services directly to their suppliers to eliminate friction from sophisticated structures,like cash management and credit operations.And there are many more segments occupied by startups,which mainly own the experience layer but do not have the core banking capability to make further progress.Altho

214、ugh it is difficult to assess the size of the embedded finance market,there is an understanding that it is a relevant opportunity for banks that have the assets and competence to compete.31 Bradesco Fernando Freitas,Head of InnovationWhat is the key metric for success?There is not much mystery.What

215、matters is the future revenue stream looking at a three-year horizon.To add,banks must carefully assess the readiness of the competitive IT attributes to enter the embedded finance market.In this regard,I believe we are halfway in our journey.The first half gave us the most business-critical attribu

216、tes.What comes next is to deepen our relevance in all market segments.We are carefully monitoring the percentage of revenue coming from third-party channels and its different dynamics.For example,we strive to improve market share in the collection processes driven by the consumption of our APIs.Inst

217、ead,on the credit side we monitor the number of leads and portfolio change that comes from partnerships.Do you think this will be a market for only a few large players?I think there is space for a more niche market in which fintechs and digital banks can differentiate their value propositions.Howeve

218、r,there is an increasing demand for mass-market offerings that deliver consistent value to the ecosystem of small and medium-sized companies that interact in the supply chains of large corporations.There is a need to close the loop of these services in a frictionless mode.There is no doubt about the

219、 emergence of dominant platforms and marketplaces that will drive and shape most of the behavioral consumption of financial services from consumers and small to medium businesses.32 DBS Hong Kong and China Alfian Sharifuddin Managing Director,Head of Technology and Operations The banking experience

220、in Greater China is radically different from that in most other parts of the world.People no longer bank on the banks app or online;there is simply no need.Instead,everyone accesses their money through super-apps.Its a remarkable experience that frees access to savings and pushes banking to be what

221、it ought to bean enabler of people and businesses.Its a massive transformation.In this conversation with IBMs Paolo Sironi,DBS Hong Kong and Chinas Alfian Sharifuddin discusses the key aspects of emerging embedded finance strategies across the region.How would you define embedded finance?Broadly spe

222、aking,I would define it as the integration of financial services into non-financial products,made possible by the increasing availability of APIs between organizations.My first introduction to the concept of embedded finance was back in 2016,when I held a leadership role in DBS technology in India.A

223、t DBS,one of our mottos is to“make banking joyful,”and to make banking invisible whenever possible to“live more,bank less,”“holiday more,bank less,”or“party more,bank less.”Embedded finance centers around becoming more integrated into your clients daily life.The reason why we are pursuing this is th

224、at we believe banking is not something you do because you want to;its something you do because you have to.Fundamentally,what we want is to help our customers achieve their life goals and ambitions.What are the key steps for getting started with an embedded finance initiative?From a technological en

225、ablement standpoint,security is the first important step.Lets say business leaders define customer journeys they want to improve or create,whether it be integrating with a transport company or a medical company.The first step is to look at the security of the data exchange between organizations.The

226、second step is defining the right governance for data ownership and data exchange.Its critical to establish an understanding of what data banks are receiving and what data banks are giving up to third parties,and how to leverage with permission the value of data exchanges.This is crucial,and it is o

227、ften a showstopper.All this must be reflected in a slightly different architecture and different skills.People need to be aware of the boundaries of the systems.33 DBS Hong Kong and China Alfian Sharifuddin,Managing Director,Head of Technology and Operations What is the role of regulation?I believe

228、it is very important because it can help harmonize approaches across the entire industry and beyond.Let me present an example and compare Hong Kong and Singapore,where both markets regulators have been very progressive to promote open banking following the UK example.Singapore adopted an interesting

229、 approach as MAS promoted the Singapore Financial Data Exchange(SGFinDex).Based on the national digital identity and centrally managed online consent system,it allows individuals secure consolidated access to their financial information held across different government agencies and financial institu

230、tions.Since the data federation was centrally governed,the industry was quick to develop solutions around it.It helped launching quite quickly.When you log in to a Singapore bank account and give the consent to share your data,you can see the federated data from all your other institutions.On the ot

231、her hand,Hong Kong worked on a similar idea,but they chose not to implement a central consent layer.They only established federation with a set of standards.If you sign up for this open banking federated layer,the consent to share data needs to be agreed bilaterally with each entity that you want to

232、 enter an agreement with.What this means is that in Singapore,if I join,they automatically see mine and I see theirs.Its very safe and simple.In Hong Kong,if I join,it doesnt necessarily mean that people can see my data,or I can see other peoples data.I still have to individually approach banks and

233、discuss data exchange and attributes.All in all,setting the right governance is essential,like having a central party that helps to coordinate the consent layer.Now,Hong Kong has gone one step further and invited non-financial entities to join this data federated layer.Theyve invited a transport pay

234、ment instrument company,a large online retailer,and several other large companies such as telecoms to join.How do you define success with embedded finance?My definition of success is when our customer service metrics increase,irrespective of the digital or physical channel in which clients make thei

235、r journeys.For example,an account opening journey has many pathways.A student might want to open an account simply through an app,from the comfort of their school.Instead,high-net-worth individuals might prefer to meet in person at a branch.We dont really mind whether it is delivered through a digit

236、al channel or a face-to-face channel.If it delights our customers,were satisfied.And if the journey has an embedded finance element to it,then it goes towards the embedded finance definition of success metric.For each customer journey,whether it involves using a credit card or buying a house,we defi

237、ne a customer satisfaction metric normalized on a scale of 0 to 5.So,a score of 4.8 is desirable,while anything below 4 is not considered desirable.34 DBS Hong Kong and China Alfian Sharifuddin,Managing Director,Head of Technology and Operations How does the organization change?Roughly five years ag

238、o,we embarked on the first stage of transformation where we created platforms rather than departments.We established a platform for consumer credit,a platform for mortgage,an investment platform,and insurance platforms.When we created the platforms,we also created a horizontal organization,grouping

239、various functions together to break siloes.We made them an autonomous unit with their CEO and mini operations allowing people to make autonomous decisions and move quickly.We discovered that decision-making speed significantly increased.Everybody was co-located.They had the same information,they had

240、 the same KPIs,and they had the same compensation drivers.Around three years ago we started the second phase of transformation,which was a data-driven operating model.Generally speaking,what we do is encourage our teams to not make decisions based on assumptions,but by leveraging real-time data.So,w

241、e create a control tower for each horizontal organization and give them the flexibility to decide what they need to see.For instance,the person managing the credit card platform might want to track the total number of cards opened or closed each day,the total outstanding revolving balances,or the to

242、tal number of transactions.The information is available to the whole team along with the leadership as a single and powerful source of truth.How would you define your strategy with digital transformations and embedded finance?At DBS,we focus on creation,participation,and orchestration.Creation is wh

243、ere the bank owns the journey.Participation is where the bank is inside the journey of others.Orchestration is where the bank invites business partners and customers to come on our journey.And we believe we need to excel in all three,though very different.One thing they all have in common is interna

244、l ecosystems.For every interaction with a partner,a consortium,or a third party,we try to rationalize in our mind what type of engagement it is whether more of a creation,participation,or orchestration type.And depending on which of these three models,we assign different types of resources.If it ali

245、gns more with the“create”model,it would be more inward-facing,employing more of our internal requirements.And the skills would be a little different.Participate tends to be the simplest,at least in my experience.The orchestrate is the hardest because you have to convince a lot of people who come and

246、 create.And create is also hard because most is done by us.I can give you an example of create.Our digital bank is our application for our customers using and buying our products within our ecosystem.We built it from scratch.For orchestrate,we have a product and service that is basically a wallet,wh

247、ere you can store some money or link a debit or credit card to your account.Weve invited a lot of merchants,food suppliers,and transport companies to live on our application.The customer can conduct his life using our app.This is probably the best example of“orchestrate”and it is among the most succ

248、essful products in Singapore.Then participate,there are many examples,such as websites that need a payment gateway.We can provide that checkout button and customers run through our gateway to credit your account.These three models require different skills and different teams.However,we dont perceive

249、 ourselves as a traditional bank but as an 8,000-person startup.Different skills are required for each of these models of interaction with other entities.35DBS Hong Kong and China Alfian Sharifuddin,Managing Director,Head of Technology and Operations Can you provide some examples about the skillset

250、needed?While the requisite skills might not vary significantly,the assembly of the team to carry out the work differs quite a bit.The focus is not the same.In an“orchestrate”situation,you may need industry network specialists who can bring together different organizations to become part of your plat

251、form.For“create,”it primarily involves internal personnel,including product specialists,all collaborating under a steering committee to deliver.And for“participate,”it would require partnership experts capable of promoting your checkout button or other tools,such as a loan disbursement tool or an ac

252、counting tool.Is innovation bottom-up or top-down?Organizations need to continue to transform.One of the fortunate things weve had is a leader who really pushes the envelope in terms of not staying stagnant and not resting on laurels.DBS is the dominant bank in Singapore.Even 10 to 15 years ago,we c

253、ould have easily chosen not to change and to do banking in the traditional way.Fortunately,we didnt do that.We underwent an extensive transformation process over the last 12 to 13 years under our CEOs leadership.Its not just vision.Its real people who made it happen.We need to keep moving with the t

254、imes.It comes down to the individual and to continuous learning,and thats something in terms of our culture that weve pushed out to all our employees in a very positive way.Everyone from the CEO down to the frontline employees at our branches has the opportunity to grow along with the organization.A

255、s soon as the organization transforms and upgrades itself to equip itself to move forward,we believe our employees should be equipped with the skills to come along with the organization.Weve successfully executed this cultural transformation,to the extent that each one of us at the bank has an eleme

256、nt of learning embedded in our DNA.36 DOKU Sujit Unni Growth Advisor Travel can be a significant and unpredictable expense for many households.Prices for airline tickets are volatile,for example.Insurance is needed for long-haul destinations.Even exchange rates can make budgeting for vacations diffi

257、cult.This is one reason why travel is becoming an increasingly valuable industry for embedded finance.In this conversation with IBMs Paolo Sironi,Sujit Unni of DOKU discusses what truly matters for the travel industry as it strives to create frictionless and added-value client journeys using embedde

258、d financial services that consider value generation for both consumers and merchants.Can you share some initial insights about DOKU and about your experience with embedded finance?Of course.DOKU is Indonesias first payment gateway,which has now transformed into a paytech company as we grow our produ

259、ct stacks.We are one of the few firms in the region that offers a payment gateway,a digital wallet,and a cash-to-digital ecosystem to enable closed-loop and open-loop payments that is targeted at serving the platform economies in the region.Over the past two decades,Ive been responsible for building

260、 out financial platforms globally and have observed four phases in the evolution of embedded finance.Initially,the priority was migrating payments from physical stores to e-commerce.Then,lending moved to the point of sale as online payments grew and banks faced challenges attracting customers for le

261、nding products.The pandemic catalyzed the third phase,with embedded finance becoming prominent in emerging economies as cash rapidly digitized.The current,fourth phase sees current accounts,savings,and investing services being integrated into platform economies,aiming to keep customers within their

262、ecosystem for all financial needs.How have you seen digital platforms leverage financial services to enhance user engagement and support merchants business growth?Most digital platforms are constantly aiming for deep user engagement,which is very challenging for most to accomplish.Generally speaking

263、,financial services are instrumental in two ways.They are levers to drive more customer acquisition and they help to improve customer retention.Many merchants often see online marketplaces as a necessary evil:they pay a service fee for using an Amazon facility to reach their customers.But embedding

264、financial services capabilities such as lending into these marketplaces allows changing the paradigm for merchants from a way to sell products to a place to grow their business.The more merchants sell,the better they are known and the more timely,frictionless,and personalized is lending supporting g

265、rowth.Platforms like Shopify are a good example.On the consumer side,there is a clear shift toward flexible payment options beyond traditional cards,such as account-to-account transfers or buy-now-pay-later(BNPL).In a multi-sided market,this payment flexibility attracts more customers while lending

266、and other banking functions are bolstering merchant activity.37 DOKU Sujit Unni,Growth AdvisorWhat motivates marketplaces to embed financial services?Most marketplaces are looking for three things.First,theyre looking for improved repeatability.They want customers to keep coming back because the cos

267、t of acquisition is very high,and returning customers are more profitable over time.Second,they look for preferential treatment from the businesses operating on the platform.This happens when the businesses see the platform as helping them grow.For example,on the one side,embedding payments in a foo

268、d delivery solution would encourage customers to return because of the frictionless experience.On the other side,restaurants can receive lending from the platform and be incentivized to channel customers activity to the platform itself.Letting the platform know about their transactions gives them an

269、 information advantage when needing to borrow more money for a better rate.Last,platforms also appreciate to diversify their revenue base through fees on the back of these embedded financial services.Should platforms partner with banks or insource financial services?The engagement model for financia

270、l services is varied and complex.Central to these services is active risk management,which banks traditionally excel at compared to platforms.Typically,platforms initially partner with banks,leveraging their expertise in underwriting risk and lending decisions while offering valuable customer data.A

271、s the platform matures,it may choose to assume underwriting risk or handle credit scoring,depending on various factors such as the cost of funds.When costs are low,platforms have a higher risk appetite.As costs rise,this appetite decreases.As such,new platforms start with banks and later consider th

272、e extent of internal versus external management based on how things play out and market conditions.Have you seen banks effectively utilize the extensive data from platforms to enhance profiling and risk management?Most banks follow a data utilization hierarchy.They first look to their own data,such

273、as savings,investment,credit,and mortgage information.When this data is lacking,they turn to third-party sources like credit bureaus and,finally,to alternate channels such as social media if needed.Platforms can of course supplement this with their unique first-party customer data,which traditional

274、banks and credit bureaus lack.This includes location data and transaction history,which can certainly reduce fraud risk.While traditional banks might be lagging in leveraging such data,neo-banks and digital banks are more adept at gathering and utilizing first-party data.This said,fintechs often lac

275、k the modeling heritage of traditional banks to underwrite loans effectively.Both sides have unique opportunities and advantages in this space.For platform customers,the maximum benefit is receiving multiple offers from lenders when seeking a loan.The platform long-term advantage is creating a rever

276、se marketplace where they can present hyper-personalized offers and give customers a choice of financial service providers.Instead of banks and fintech offering products they want to sell and sourcing clients,it is the platform users who express their financial needs while banks and fintechs meet th

277、eir demand with personalized offers.The biggest challenge is how to get to that common set of data to effectively allow multiple financial services providers to be able to underwrite a customer and do so in a more personalized way.Our ability to be able to standardize what information these banks ne

278、ed is critical.For a platform,its a massive overhead.Open banking is getting there quickly.As open banking becomes more standardized,that friction point will go away.38 What is core to add value in a partnership?Three elements are crucial:architecture,the KYC/AML process,and data.First,ease of integ

279、ration driven by an architecture with standardized APIs is key.Traditional banks struggle with this compared to neo-banks.Second,refining the KYC/AML process is essential.Due to regulation,banks often redo the platforms KYC asking for more information,which can be a major point of friction.If banks

280、can streamline these processes,platforms may consider opting to use the banks KYC services.This would require an active risk management strategy that works for digital transactions.Finally,reducing friction across the user experience is imperative.Forcing a customer to leave a platform to log into a

281、 bank app to process a payment is a friction point.What banks should be able to do is embed servicing aspects into platforms.From the platform perspective,I never want my customer to leave my real estate and go somewhere else.Do banks offer an adequate portfolio of products,and does this portfolio m

282、eet the current market needs?Well,Ill say adequate banking products must be interoperable and must be channel-agnostic.The same product exposed in the banks branded channels must also be ready to be embedded on non-branded channels.While this is something that platforms have done historically very w

283、ell,banks,I sense,are still struggling to even understand the value.They might offer you a product for one channel but not for another.Instead,platforms have always been very channel-agnostic by design.How do differing financial regulations and practices across various jurisdictions impact digital p

284、latforms?Most global platforms operating across multiple geographies and segments encounter distinct regulatory environments and also very different consumer behaviors.Thinking of consumers,90%of US customer transactions are credit cards.In Europe,that whole ecosystem changes to 80%of transactions b

285、eing account-to-account transfers.If you are a platform and you did not support open banking in Europe,you just lost 80%of your customers because they traditionally transact account to account.Instead,in Nigeria or Indonesia more than half the transactions are cash-based,so you must be able to suppo

286、rt the ability to buy something digitally while using cash.Firms like DOKU take the payment capability to the point of sale so platform customers can buy online but pay in cash.The other aspect is currency volatility in countries like Argentina,making forex protection a relevant capability.On the me

287、rchant side,a key aspect is the liability shifts across regions.In the US,you are expected to be responsible to not borrow more than you can repay.The liability of being able to figure out if the customer can pay for what is borrowed largely sits with the customer.As you move into the European and t

288、he UK ecosystem,the liability to ensure that customers are not borrowing more than they can repay sits with the financial institution to a large extent.This is why the KYC need is much more important.Its hard to find any financial services provider that can support an entire global system.Platforms

289、must partner with specific regional players,both for payments as well as expanded financial services.DOKU Sujit Unni,Growth Advisor39DOKU Sujit Unni,Growth AdvisorWhat could banks do to better support platforms?What would help any platform is to learn how banks are thinking of embedded finance.What

290、are the other use cases that embedded finance can offer that platforms may not be thinking about?Many platforms are thinking about lending.Many are starting to think about embedded finance in terms of helping customers grow their business.Even small things like the ability to partner.I believe banks

291、 will have to solve the same problem that we are trying to solve for our customers.We want the customer to see us as a way for them to grow their business.The customer wants to move to a place where they believe their money is well-spent because they are growing their business.I feel like banks shou

292、ld also be thinking the same way.They can help grow our business in some way.Then you have a partnership.What is your special message to your peers in banking?I believe embedded finance is where the world is going.Over the next several years,the world will become more digitized.Business will be cond

293、ucted within large platform economies.If they want to stay competitive,banks will have to embrace embedded finance.In my view,traditional banks have a lot of advantages that newcomers dont.What banks need to do quickly is take those advantages and start to democratize them into these platforms.Finte

294、chs provide great products,but they dont necessarily provide the ability to scale to address the complexity that is needed for offering financial products and services.Banks have great products,the scale,and the financial acumen to deal with complexity;they just dont have the open architecture for q

295、uick adoption.Thats where the opportunity is today.40 Enel Giovanni Vattani Global Customer OperationsEmbedded finance transforms the relationship between banks and partners beyond product definitions.The core of the relationship is not distribution,but rather co-creation of new solutions that impro

296、ve client journeys.For that to happen,banks must deepen their understanding of what drives value for third parties operating in other industries.It is a change of mindset from banks viewing partners as the next distribution channel and shifting to a new way of working to grow together successfully o

297、n digital economies.In this conversation with IBMs Paolo Sironi,Enels Giovanni Vattani touches on partnership decisions and success metrics that define the collaboration of utility firms with fintechs and financial institutions.How is Enel,a prominent manufacturer and distributor of electricity and

298、gas,thinking about the implication of embedded finance within the utilities market?Enel X Financial Services well represents our vision of digital transformation that embraces embedded finance.It serves as an electronic money institution offering a comprehensive banking solution,including the Enel X

299、 Pay card.Launched in 2020,the initiative aimed to engage mass market customers and expand our service offerings beyond electricity and gas sales.In the utilities market,the provision of microcredits to facilitate bill payments holds great appeal for customers in the sector.Typically,when invoices a

300、re issued,a significant portion of the credit is assigned to a financial intermediary,which earns a fee in the process.However,by enabling customers to easily pay their bills without incurring the costs associated with credit transfers,the utility-customer relationship can be revolutionized through

301、embedded finance.What were the key factors that motivated Enel to pioneer embedded finance within the utilities industry?Our ambition to integrate financial services dates to 2013-2014.At that time,the notion of becoming an electronic money institution was hard to imagine given the absence of a clea

302、r legislative framework.However,with the introduction of the European PSD2 regulation,many of the initial obstacles were eliminated.From a business point of view,the primary motivation was a need to strengthen customer bonds.Why?Well,Enel is the Italian leader for electricity supply.However,competit

303、ion has grown fierce and no longer takes place on the price of electricity.Instead,customers have shown to be very sensitive to additional services.They dont simply want to turn on the light and see that it turns on today.It is this awareness that made us take our first steps with embedded finance.W

304、hat are the important choices you had to contend with during the start of this journey?The first choice was between buying or building.We decided to buy the payment technology in 2020.In-sourcing a payment method has been an accelerator that allowed us,if not to bring home an advantage over the whol

305、e strategic thinking,then to gain immediate economic benefits such as lowering transaction costs compared to the market.This became clear when we connected to pagoPA,the national platform to pay taxes,duties,or fees to the Public Administration.The value of in-sourcing does not exclude the value of

306、partnerships,which is the route taken by ENI with payment provider Nexi.41 What success metrics should management consider when developing embedded finance initiatives?More than metrics,our management set the expectation bar at a strategic level.Going into a field outside our core businessselling en

307、ergy or gaswas not seen as a tactical effort,but a request to become either first or second in the market.This was our challenging KPI,expressed in words more than numbers.Embedded finance is an opportunity for both financial institutions and utility firms.Who has been first to pursue this value?Thi

308、s is a very interesting question.Sometimes we struggled to make our potential partners understand where we were going with this and what we were doing.In general,the problem we faced was more about understanding the value to be shared.Approaching financial services players who are leaders in their m

309、arketwhere we are beginnersmakes it more difficult to define the scope of a profitable collaboration.Instead,starting with smarter players in sectors where there is,perhaps,even greater competition seems simpler.For example,talking about collaboration with the world of fuel cards was not easy.Instea

310、d,it was easier to approach an insurtech player because they were already more inclined to accept partnerships of this kind.Ultimately,all the parties we worked with understood what we wanted to do,the benefits we could bring together to our customers,and the needs we were going to intercept.Is ther

311、e a difference in the approach of fintechs and financial institutions?All have a great desire to work in this space,and even more to achieve concrete results.However,relationships with fintechs are simpler.Having a partnership or contract with a leading company means they can validate their solution

312、 on volumes.On the other hand,its important to thoroughly examine fintech proposals,as its not easy to find a partner who doesnt only pursues numbers,but sincerely desires a partnership based on a continuous co-creation relationship that is competitive and differentiating.How would you approach part

313、nership decisions?Well,there is an obvious tendency to look more closely at collaboration with partners who dont start from scratch.But what matters is time to market,which is monitored very carefully.That means finding not only the best technical solution,but also the partner capable of accompanyin

314、g integration and development quickly.Furthermore,another element that tips the balance one way or the other is the possibility of developing something new together at that moment.Therefore,beyond acquiring standard services that are already in place,it is essential to perceive a will to co-create a

315、nd innovate new services.Enel Giovanni Vattani,Global Customer Operations42 Enel Giovanni Vattani,Global Customer OperationsHow relevant is it to work with a varied ecosystem of providers versus finding a partner capable of providing a full stack of financial services?It certainly makes sense to wor

316、k with a diverse ecosystem,as taking multiple different interfaces allows for more vertical specialization.There is clear value in a multiplatform approach,with some preconditions.While much has happened in recent years,its time to think about how to unlock the potential of embedded finance beyond o

317、pen banking.The technology is here,but what is missing is standardization.Its a mantra that we all tell each other in the payment ecosystem,hoping that PSD3 regulation can generate positive change.The big question mark is from potential partners who will say,“OK,thats great,we do everything via API.

318、But we connect with 60%of the banks only.”Or,“We dont connect with that bank.”For a utility firm,it becomes complicated and expensive.There is a need for a financial ecosystem in which participants can say,“I have no problem connecting with anyone.”What is missing today in embedded finance offerings

319、 from financial services intuitions?Today the BaaS offerings are quite good.But one thing could be advantageous:powering instant payments at no cost is a service that all banks should offer.It would be a highway toward the explosion of open banking payments.In many countries,the only way customers c

320、an pay is with a bank transfer.Digital instant payment solutions would grant two advantages:ascertaining that payments take place within a given time frame expectation and simplifying processes by no longer having to chase the reason for payment,who made it,and in which credit account to land it.Red

321、ucing transfer costs and related operations is a clear opportunity that needs no fireworks.But what matters the most is that it is the right time to take B2B customers by the hand and make them understand that utility firms are not simply a supplier of something,but also seek to provide it in the be

322、st possible way.Whats the most relevant embedded finance use case for a utility firm?In my opinion,the most important opportunity can be found in the electric mobility ecosystem because it is gaining ground at all latitudes:cars,scooters,all those vehicles that need an electric recharge.In Latin Ame

323、rica we are very active in bus-type mobility.We are the main provider of local mobility in Lima.Mobility is an umbilical cord that unites all types of B2C,B2B,and B2B2C customers.The customer who goes to recharge their electric car must be insured and will need micro finance to pay the bill or the c

324、ar.The strategic idea is to create a positive circle around these multiple needs.43Enel Giovanni Vattani,Global Customer OperationsHow relevant are regional differences for international firms?First,firms need to have a 360-degree view of all the businesses in all the countries where they operate.Th

325、en,they must scale down needs and ambitions differently from country to country.Its necessary to start from a minimum common denominatorto meet customers and offer the best possibilities to pay the bill,or to meet them if they cannot pay it,wherever they are.This scales geographically.Then,additiona

326、l solutions can be offered in countries that are more developed from a digital perspective,as in Brazil,building partnerships with local providers of embedded finance services.Obviously,there is value in working with multinational players.But often,the greatest value comes from doing a country verti

327、cal.What would you suggest banks,insurance companies,and fintechs do to better serve third parties with embedded finance strategies?Deepening their understanding around what third parties would like to do.In the sense that often playersespecially the big banks and large tech firmsare very clear abou

328、t what they can sell,but not always clear about what non-banking firms can bring to them as added value.This can limit understanding of the new value we can create together.Increased willingness to study business cases together would be welcome.In short:third parties want to be seen not only as a di

329、stribution channel,but as a growth opportunity.44 HSBC Shayan HazirChief Digital Officer for ASEANThe fourth industrial revolution is about platforms and exponential technologies like data and AI,which interact to reorganize entire ecosystems made up of companies,citizens,and public institutions.Wel

330、l-orchestrated platforms generate new data not only about individual clients,but also about entire ecosystem interactions.This is an opportunity for banks to enhance risk management as part of their embedded finance strategies while serving the economy under uncertain market conditions.In this conve

331、rsation with IBMs Paolo Sironi,HSBCs Shayan Hazir discusses all key aspects of banking transformations with embedded finance.Has the industry achieved a consensus on the definition of embedded finance?I have encountered several accepted definitions of the term“embedded finance,”one of which being fi

332、nancial institutions establishing basic partnership agreements to provide services to third-party customers.Another which demands higher levels of integrations wherein banking services are openly exposed to final consumers via API capabilities,allowing for free information flow.And another wherein a

333、ll back-end financial services capabilities are provided to third-party platforms without being visible at the front end or customer experience level.Is there a sense of concern among your peers regarding the possibility of embedded finance resulting in the loss of client relationships?Two distinct camps have emerged.One fully embraces embedded finance as the future of financial services.Another h