The Digital Banker (TDB): What has the impact of embedded finance been on various industries so far? In what ways do you think it will continue impacting them, especially the banking and financial services industry?
Phill Rosen, MoneyLion: While we’re still in the early innings, embedded finance has already had a big impact on many industries, especially where consumer transactions are taking place. The more obvious impacts are in e-commerce, where buy now, pay later (BNPL) and real-time issuance of affinity cards are commonplace.
However, consumer expectations of embedded finance in various marketplaces are growing exponentially. For example, bank linking to facilitate transfers, data permissioning when opening accounts, or facilitating financial advice and planning are common. Meanwhile, in the B2B world, we see the digitization of invoices, receipts and accounts payable changing the way business credit is issued.
New use cases that leverage financial and other data to personalise consumer experiences are becoming more common as well. To many, this will look like marketing, but in fact, it’s increasingly about personalisation.
Reports suggest that the embedded finance market is poised to continue its growth over the coming years. What are your thoughts on the future of this market?
Embedded finance is really just the maturation of digital consumer finance. Consumers expect the apps and experiences they engage with to be truly personalised and seamlessly integrated. An individual’s finances are at the root of that, and embedded finance will keep growing until all of the financial tools consumers need are embedded in the places that are relevant. Embedded finance will keep growing until consumers’ finances are embedded everywhere the consumer transacts.
What are the challenges and opportunities in embedded finance? How does MoneyLion fit into this picture?
The biggest challenge in embedded finance is that the US financial system is incredibly mature and truly massive in scale. Decades of technology and hundreds of years of financial and payment practices have to be reworked, exposed and integrated with each bit of progress made by embedded finance companies.
What are your thoughts on new and emerging technologies such as open banking, APIs, and artificial intelligence?
APIs are nothing new. The internet has been built on them. What is new is that banks have joined fintech startups in efforts to expose their functions for others to use via APIs. Until recently, banks have been very hesitant to do that. Now, leveraging APIs is the expectation and doing so is a lengthy process, as there is so much legacy technology that has to be either replaced or modified to make this work. While AI is still very much in the early stages, it should be used to drive improved personalization for the consumer and boost operational efficiency. However, I believe the most important impacts of AI are yet to come.
How do you think current market conditions will impact the fintech and financial services industries?
The impact of market conditions on the fintech and financial services industries have so far been positive. The Zero Interest Rate Policy (ZIRP) caused a large number of startups and fintechs to deprioritize the profitability and survivability of their companies. While it brought a lot of innovation, the lack of an imperative to turn a profit often meant a lack of focus on product market fit. This led to the creation of a lot of companies that didn’t really have a right to exist. Recent market conditions have refocused the industry on the consumer and basic economics, leading to stronger companies that will be around to innovate for a long time.
