Embedded finance, a digital transformation in financial services, is one the most popular trends in FinTech and is spreading like wildfire. Due to this surge, software development in the finance sector has also seen a rise in job opportunities all over the world. Implementing embedded finance comes with a promise of high customer loyalty, better insights into customer payment patterns, and generating new revenue streams.
Role of Artificial Intelligence in FinTech
AI is playing a pivotal role in finance software development for the FinTech industry. The application of AI enables FinTech companies to automate routine procedures, anticipate and prevent fraud, and identify threats more efficiently. These advantages lead to enhanced customer satisfaction and, ultimately, more profits.
AI can also be used to gain valuable insights from the data collected by FinTech companies from the daily transactions carried out by their customers. This data is then used to increase safety, collate an AI-based credit score for each customer, and possibly provide customized financial solutions to them.
Understanding Embedded Finance
Embedded finance is nothing but the integration of banking services to a traditionally non-financial platform. We work with embedded finance on a daily basis. For example, embedded insurance like travel insurance while booking your flight tickets. Also, embedded payments which is the seamless integration of a payment infrastructure within an app. There are a lot of such services under the umbrella of embedded finance.
Important Factors That Enable Embedded Finance
Now that we have an idea of what embedded finance is, let us look at some key factors that drive the advancement of embedded finance. There are many reasons a company would want to integrate embedded finance in their services, including better customer satisfaction, higher profits, and gaining an edge over the competition. Let us look at some of the important factors in detail.
Change in purchasing behavior
One of the most important benefits of embedded finance integration is the ability to detect a change in purchasing behavior. This change in purchasing behavior might be a potential fraud that can be thwarted by taking a few preventive measures. However, there are a few additional authentication methods in case it is not a fraud. This further builds up consumers’ trust in the service.
Consumers sharing personal data
In today’s fast-paced world, everyone is more inclined towards the easiest and fastest ways to accomplish even the simplest of tasks. Embedded finance provides just this. However, to achieve better results, it needs personal data from the consumers. This is an important factor in determining the success of integrating embedded finance into a platform. Without sufficient data, this software would not be able to gather proper insights to give the best value to the customers.
Competition amongst companies
Finance and IT are the biggest industries today. In this cut-throat competition, efficient FinTech services not only give an edge over other companies offering them but also over traditional finance and IT companies. This is one of the most motivating factors for companies to consider and invest in integrating embedded finance. Companies also try to come up with innovative services that they can offer with the existing resources for attracting maximum customers.
Benefits of Using AI and ML in the FinTech Industry
AI and ML bring in a lot of advantages for FinTech companies. The most important is the generation of valuable insights from the heaps of data being recorded from the customers.
This data which seems fruitless in its raw form gives a ton of information like a customer’s expenditure patterns, interests, and other financial activities. It gives the platform the ability to predict the transaction patterns of a customer in the near future. The accuracy of this prediction keeps getting better with the increase in the amount of data being fed into the AI.
New revenue stream
Embedded finance is a banking service in a traditionally non-financial organization. Naturally, this means that embedded finance adds to the company’s revenue and can be considered a revenue prospect.
Improved customer experience
As the use of AI and ML algorithms in the platform generates never seen before insights about the customers, it has great potential of improving customer experience on the platform. For example, using AI bots to handle basic customer queries and complaints. Automating this process can save you a lot of important resources and time to invest in other prospects. With all this data, the company gets to understand its customers better and provide personalized services to attract more customers and retain the existing ones.
Use of existing resources
AI and ML can make use of existing resources like customer search logs to generate an algorithm that suits their habits and choices. For example, in an e-commerce platform, AI can capture user search data and show related results and offers at the top the next time they log in. This would help grab their attention and might result in them hopping on the platform more, thereby increasing traffic.
The enhanced and personalized services offered by a platform or a company as a result of AI used in their embedded financial services can result in a positive increase in traffic. This would result in higher chances of customers utilizing their services and generating revenue.
Significance of Embedded Finance
As a result of this embedded finance boom, companies have a lot of opportunities to innovate and provide services that couldn’t even be thought of a few years back. It has triggered a whole new era of evolution where there is virtually no limit to imagination and its implementation. At the same time, it has brought an unprecedented level of ease to banking services. Not to mention the people flocking to job opportunities in software development for FinTech.
Future of Fintech with Embedded Finance
As we can see from the numerous benefits that embedded finance brings to a company, we can safely assume that it is here to stay. It provides an upper hand in the market to any company that can leverage the best of its potential and helps them reach a better position in a comparatively shorter period of time.
To conclude, we can clearly see how this digital transformation of financial services is beneficial to FinTech companies as well as traditional companies venturing into FinTech. It is helping people on a daily basis not only by making financial transactions easier but also by bringing new opportunities for financial software development. VLink is a top IT services company that provides unparalleled digital transformation and managed IT services. We are a leading team of software engineers at this FinTech software development company that can help your financial service firm to scale heights.