Kamaljeet Rastogi, Chief Executive Officer, Manipal Business Solutions

Kamaljeet Rastogi is the CEO for Manipal Business Solutions (MBS), owned subsidiary of Manipal Technologies Limited (MTL). He has over 2 decades of experience in continuously developing products which would enable millions to benefit from Financial Services over new channels like mobiles, handheld devices, and agent networks of banks, telcos and retail companies. Before joining MBS, he was the Vice President, Mobile Financial Solutions at Mahindra Comviva. Earlier he was Vice President, Strategy and Special Projects at Reliance Jio Infocomm. He began his career working for multinational Banks like Citibank and ABN Amro based out of Singapore.


The fintech story so far

In the past two years, millions of customers have not had any reason to visit their banks. While the pandemic played a major role in this behavioural shift, just as critical was the rapid acceptance of smartphone-based innovative payment solutions. This has been made possible by advances in the field of “fintech”, which involves the innovative application of digital technologies to improve access, delivery, and customer experience related to banking and financial services.

In less than a decade, fintech has grown into a multibillion-dollar industry worldwide. KPMG’s Pulse of Fintech report estimates that in 2021 alone, 5684 fintech deals attracted over US$210 Billion in funding globally. Venture Intelligence estimates that Indian fintech companies raised US$6.9 Billion across 194 deals in 2021. Fintech products have improved financial inclusion by giving traditionally unbanked sections of our society convenient, easy and speedy access to banking and financial services. They have enabled many MSMEs to overcome the challenges they faced during the pandemic.

With the emergence of a large number of fintech apps, developers are dedicated towards increasing their visibility and making sure the consumer utilises it as his default app. However, given the plethora of choice, consumers prefer using multiple apps based on available balance, acceptance at given POS, loyalty/ rewards etc. Thus, they end up maintaining balances in a number of wallets and this money does not earn interest. The phenomenon that users need to access a separate app to pay for the purchase creates “friction” and discontinuity in customer journeys. Customer data resides in multiple apps, thus increasing the risk of data privacy violations. It also becomes harder for businesses to use partial chunks of dispersed data to build customer profiles that enable superior targeting, engagement and sales.

Embedded fintech can offer significant benefits to customers and businesses

The next stage of evolution is embedded fintech, which seeks to address the above drawbacks by providing consumers a wide range of banking and financial products and services from within the platforms where they are at the point of need. This phase will see apps being replaced by platforms.

The vision of embedded fintech platforms is to build scalable, secure, highly available ecosystems of banks, financial service players, insurance companies and other complementary businesses. The intent is to give customers on the platform access to a wide range of products and services and the ability to complete their journeys without exiting the platform. This is expected to increase usage and hence, loyalty.

The more a customer uses an embedded fintech platform, the richer the customer data available to the platform owner(s). Subject to appropriate governance and security, the ecosystem can use the data available on the platform to profile customers and generate behavioural insights. These can then be used to present customized and personalized offers that have a higher chance of customer acceptance. For ecosystem members this creates a virtuous cycle of increasing revenue, profitability and long-term loyalty. This paradigm will also tangibly improve customer experience, besides giving them better pricing, discounts etc.

Embedded fintech will help businesses take greater control of their own destinies. Instead of depending on third-party apps, banks, financial services companies and other business enterprises will become part of platform-based ecosystems. While some businesses will make the strategic choice to build their own platforms, others will work with third-party platforms. The former approach will give enterprises greater control over architecture, design, UX/UI, security, governance etc., while the latter can help adopters reap the benefits sooner. In a market like this, the first-mover advantage will be key.

For many businesses, the strategy hereon will be to own (or co-own) functionality rich embedded fintech platforms to attract new partners who can expand the range of complementary products and services. Such platforms will attract a larger set of captive customers to whom individual companies on the platform can cross-sell/up-sell/bundle offers on the basis of superior insights. Thus, these platforms can create a virtuous cycle of broader and deeper customer relationships that can be monetized more efficiently and effectively. Simply put, an embedded fintech platform will function as better-informed matchmakers between customers and businesses. Given the severity of the high volumes of personal data present, the platforms will truly need to ensure compliance with industry-specific regulations as well as enable high standards of data privacy and cyber security.

In lieu of the benefits, many players from India’s banking, financial services and insurance industries have already begun to adopt embedded fintech. These platforms already offer customers a large portfolio of offerings around payments, investments & wealth management, insurance, digital retail lending, cross-border transfers, personal finance, credit rating etc. Usually, these products are traditionally offered by different legal/business entities.

Here are three examples to illustrate how embedded fintech platforms are transforming customer experience and driving business growth:

  • Insurance companies can easily scale up distribution across the country without opening physical offices. On the platform, life and non-life insurance (e.g., home, vehicle, health etc.) products can be bundled along with loans for homes, two-wheelers and cars originated by banks or NBFCs. Such cover can be purchased and activated on-the-spot. Better information about customers and their families can reduce underwriting risks; claims processing too can be simplified.
  • Buy Now Pay Later (BNPL) solutions can also be easily integrated into embedded fintech platforms. BNPL providers will be able to make better-informed credit risk decisions based on the individual’s transaction history, which will be available on the platform. BNPL offers can be bundled when individuals are purchasing durables or other products as well.
  • Customers can access personal or education loans and make investments in equity and debt instruments from the platform; these offerings can be provided by both banks and non-banking finance companies, giving customers greater flexibility and the convenience to select what’s best for them.

India is currently amongst the largest fintech ecosystems after the US and China. Given the transformative and business potential for embedded fintech platforms in a country like ours, this space will see rapid growth powered by a number of innovations and increasing adoption. Juniper Research estimates the market for embedded Banking, Insurance, Investments, Lending and Payments to grow from U$43 billion in 2021 to over US$138 billion in 2026- a compound annual growth rate (CAGR) of over 26%! During the period 2022-2029, revenues from embedded finance in India are expected to grow at a CAGR of 30.4%, growing from US$4.8 Billion in 2022 to over US$21 Billion by 2029. With this, embedded fintech has a promising future with a clear growth trajectory. It gives the opportunity to banks, fintech companies, and other related businesses to collaborate and simplify the existing process resulting in enhanced customer experience.

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