Embedded banking will change everything. Here’s how, according to futurist Brett King
Embedded banking means consumers have more ways than ever to manage their finances, and businesses have a growing pool of options for serving their customers. So what can we expect from the market in the coming years? Treasury Prime caught up with futurist and international bestselling author Brett King to hear his insights.
To understand where embedded banking is headed, we first need to define what we mean. Embedded banking refers to the integration of banking tools and bank account access into non-financial apps or settings. Thanks to API banking technology and banking as a service (BaaS) providers, it’s easier than ever for businesses to take advantage of this trend.
The integration of banking into other day-to-day services is bringing us closer to new pathways for financial wellness, says King, author of seven books including his most recent, “The Rise of Technosocialism: How Inequality, AI and Climate Will Usher in a New World Order”; and 2016 bestseller “Augmented: Life In The Smart Lane.”
It’s also making it easier than ever to do business. King says companies will increasingly expect the conveniences of embedded tools from their financial services providers — and that providers who don’t start offering those options will fall behind.
“The companies that win will be those that make it just as easy as possible for people or other players to work with them,” he told Treasury Prime. “If you're not connected into this ecosystem, people are just going to find it harder and harder to work with you compared with other options that are available in real-time.”
Here are three of his top predictions for how embedded banking will reshape the ways in which people and businesses interact with their finances.
1. Built-in financial literacy
As banking becomes more embedded across user interfaces — whether those interfaces are smartphones or other technology like smart speakers — financial tools will increasingly coach people on how to manage their money, said King. And critically, this coaching will relate to the real financial needs of those struggling with financial security.
“Most of the time, financial literacy is about using products that the banking system has created, or investing in asset classes the way the capital markets and investment businesses have structured it, rather than it actually being, ‘how do you become financially healthier,’” said King.
You can already see this shift with financial wellness tools like Treasury Prime partner Wagestream, which contracts with employers to provide wage workers with tools for managing their earnings and building up savings. These include an Earned Wage Access (EWA) feature that allows employees to receive money they’ve earned before their next paycheck, thereby avoiding having to take out loans; and an automated savings feature called “Save the Pennies” that rounds paychecks down to the nearest dollar and transfers the change to a savings account.
King says the trend has the potential to go further, with even more automated features. Maybe a fintech app or neobank notifies a user when it looks like funds in their account won’t be enough to cover an upcoming regular payment like car insurance or rent. The app could suggest the user reduce their spending by a certain amount over the next few weeks, or could offer them ways to earn extra cash through gig work to cover the bill. Perhaps the app integrates with gig work apps on the user’s phone, such as an on-demand delivery or rideshare service.
“A lot of the time, the situation we find ourselves in is, ‘Oh, I totally forgot I had to pay this,’ you know — my life insurance, whatever it is, right? And then you find yourself short, or really scrambling to make that payment,” he said. “So just giving you visibility, and making you aware of those ebbs and flows of your finances, is important.”
2. Rise of smart credit
Traditionally, people secure credit ahead of time. They apply for a loan, or a credit card, then apply that line of credit to their spending. This model is already being disrupted with buy-now-pay-later options on e-commerce sites through companies like Affirm, that let users pay for items in installments. King predicts the trend will extend further into brick-and-mortar shopping and will respond to the context of individual user needs.
Picture this: Someone goes to the grocery store without realizing their checking account had just been depleted by their mortgage payment. Today, they might face the embarrassment of their card getting declined at checkout. But what if an app on your phone connects the dots before that happens, by registering that your account is depleted and that you have just entered the grocery store?
“Your smart wallet or smart bank account says, ‘Well hang on a second. I know you go grocery shopping here every few weeks, I know you spend this much money on your groceries. I know you've just walked into the grocery store, and I know you don't have enough money to pay for the groceries you normally buy. So I'll give you an option for credit when you walk (into) the store,’” said King. He calls it “contextual credit.”
3. Predictive cash flow data for businesses
Right now for small businesses, if your bank provides accounting services or your accounting service can open a bank account on your behalf, that’s a pretty sweet perk. But it’s far from standard, with only a few startups like Treasury Prime partner ZenBusiness offering it. King said to expect combination banking and accounting services to soon become table stakes.
“I don't think any small business will choose a bank in the future unless accounting is provided for it,” he said.
But the “sweet spot” for business banking tools is going to be predictive data.
“If I've got your bank statements, and I know your cash flow, and I see your accounting, I can now predict the cash flow of your business many months out, potentially. I can tell you when you need more funding to grow the business,” King said.
Predictive capabilities get even more powerful when more data from outside the business’s bank account is brought in. There’s predicting revenue based just on the business’s cash flow history, then there’s predicting opportunity for growth by bringing in other sources of data. A mortgage brokerage can accelerate its growth by linking its own banking and accounting data with real estate data, for example.
“So that's sort of the world of opportunity that exists for these types of interactions, where we embed your banking and finance in your day-to-day world,” said King.
Want to learn more about the promise of embedded banking? Download our white paper on how to harness the power of embedded banking to build new revenue streams.
Your business strategy and priorities are unique, and so is your journey with embedded banking. Treasury Prime is here to support you — whether you’re just exploring, or you’re ready to dive in. Developers can experiment with Treasury Prime’s API in our Sandbox, and our sales team is always available for your questions. Contact us.