FinTech upstarts seem to grab headlines every week with flashy new apps and skyrocketing valuations. As legacy institutions, how can banks and NBFIs compete? This article shows how embracing digital wallets and embedded finance can evolve your offerings into the digital age while outsmarting disruptive competition.
Frictionless Finance is the Future
Today's consumers, especially millennials and Gen Z, expect seamless digital financial experiences. The numbers speak for themselves:
- 83% of the UK population would not struggle to cope in a cashless society in 5 to 10 years
- Digital wallets are expected to process over $12 trillion in transactions globally by 2026
Today's both consumers and small and medium-size businesses want:
- Instant account sign-ups and loan approvals
- Intuitive mobile apps
- Integrated online payments for businesses and end customers
- Personal financial data at their fingertips
If your institution lacks these table stakes digital capabilities, restless customers—especially young adults—will not hesitate to switch services.
Seizing the Embedded Finance Opportunity
Embedded finance integrates financial services directly into non-finance digital platforms. For example:
- Lending services in retailers' online shops
- Bank account sign-ups within neobank apps
- Insurance offerings within eCommerce marketplaces
The embedded finance wave will become a $7.2 trillion market globally by 2030. Leading through an open banking paradigm, your institution can capture this growth by embedding highly tailored offerings across customers' digital ecosystems.
Winning the Digital Wallet Wars
Digital wallets eliminate friction by combining online payments, banking, rewards programs and more – all easily accessible on customers' mobile devices.
The most actionable and winning strategies for businesses that would like to tap into the benefits of embedded FinTech solutions like digital wallets include:
- Launch your own branded wallet. Providing a customized mobile wallet bearing your company's brand and tailored to your customers' needs can greatly expand their share of wallet and loyalty. Key features to consider include:
- Integrated checking, savings, credit card and lending to allow account access, payments and financing in one place. This convenience incentivizes preference for your wallet over others.
- Rewards redemption and management so users can easily track and use earned points and perks. This drives engagement with the brand.
- Budgeting tools synced with account data so users can analyze spending habits and manage finances through your wallet. This sticks them into your ecosystem.
- Digital receipts and card controls for convenience features that make your wallet helpful in customers' daily lives. This cultivates reliance on your tool.
- Leverage an all-in-one platform. Embedding flexible banking, credit and financial tools into a single do-it-all wallet app provides tremendous convenience for users. Capabilities to integrate include:
- Seamless onboarding and account opening through the app to facilitate easy sign-ups.
- In-app bill pay and peer-to-peer payment functionality to enable management of bills and money transfers.
- Access to savings accounts, lending platforms and credit cards to allow various financial needs to be serviced in one place.
- Personal financial management tools to track spending, create budgets and analyze financial health.
- The all-in-one approach maximizes convenience, engaging customers with an app that can become central to their daily financial lives. This cultivates loyalty and long-term retention.
- Personalized in-app rewards. .Offering customized promotions, perks and loyalty programs tailored for each individual user is a powerful strategy to increase engagement and drive more transactions through the wallet app. Some specific tactics include:
- Offer customized promotions and discounts based on user data and behavior. By analyzing transaction history and habits of each customer, merchants can provide targeted offers that align with users' needs and preferences. This helps make offers feel more relevant.
- Allow users to earn points or rewards for transactions and engagement with the app. Set up tailored rewards programs where customers earn points for both spending and for engagement actions like referring friends, taking surveys or watching promotional videos. This incentivizes use of the wallet and the app.
- Integrate existing merchant loyalty programs into the wallet for easy points tracking. Enabling customers to view reward balances, tier status and easily redeem points creates a convenient experience where the wallet becomes their hub for loyalty perks.
- Enable easy redemption of earned rewards and perks directly in the app through customized coupons, instant discounts and claimable offers. Allowing direct redemption makes the value of the rewards more tangible for users.
By providing data-driven personalized promotions and seamlessly integrating loyalty programs into the wallet app, merchants can dramatically increase customer engagement with and use of embedded finance solutions.
Final thought
This article makes a compelling case for financial institutions to embrace digital wallet and embedded finance technologies in order to stay competitive in the face of FinTech disruptors. It argues that today's consumers, especially younger generations, expect and demand frictionless, seamless digital financial experiences accessible from their mobile devices. They are prone to switch services if legacy institutions cannot meet these expectations.
The concept of embedded finance, integrating lending, banking, and other financial services into customers' existing digital platforms and ecosystems, presents a $7.2 trillion global opportunity by 2030. To capture this, institutions must take an open banking approach to provide tailored offerings where customers already are digitally.
Winning digital wallet solutions conveniently combine payments, banking, rewards and financial management into intuitive mobile apps. Banks and NBFIs have three key strategies to leverage digital wallets: launch their own branded wallets with integrated features that promote loyalty, leverage all-in-one wallet platforms that centralize users' financial lives, and offer personalized promotions and loyalty programs based on customer data to drive engagement.
By providing the digital, embedded experiences modern consumers expect while expanding offerings via digital wallets, legacy institutions can retain customers and outsmart encroaching FinTech disruptors. The future of finance is frictionless, mobile, and embedded. Incumbents that fail to innovate will cede ground to disruptive upstarts. By embracing these new technologies, traditional institutions can usher customers into the digital future while securing their competitive positions.
Follow these guidelines, and your institution can outflank even the hottest FinTech disruptors. Master digital wallets and embedded finance now before it's too late!
Author bio
Dmitry Shcherba is Digital Content & PR Executive at Wallet Factory. As a long-time FinTech enthusiast, Dmitry is dedicated to spreading awareness about how financial technology innovations can promote financial inclusion around the world. He firmly believes that digital financial services have immense potential to let the underserved access the global financial system.
Dmitry Shcherba on LinkedIn: https://www.linkedin.com/in/dmitry-shcherba/
Personal blog at Finextra: https://www.finextra.com/bloggers/138859
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