• Thu. Mar 28th, 2024

Exploring The Next Wave Of Digital Banking

Alfred Kahn is the founder and CEO at OvationCXM, a customer experience management company.

Embedded finance has become ubiquitous throughout many industries as businesses continue to desire financial services in their platforms.

Although the opportunities embedded finance provides by increasing convenience to the end user and expanding revenue streams for the financial institutions that power the products, embedded finance complicates a company’s ecosystem. It can make it harder to deliver A-plus customer experiences.

Meanwhile, B2B use cases are growing quickly as companies look for fast and easy ways to speed up receivables, ensure transactions and more. Both the financial providers and the companies that are embedding these capabilities have to be intentional about maximizing the benefits of embedded finance while managing any pain points that come with having more moving pieces involved in delivering these financial services.

Financial institutions have begun recognizing the potential for lucrative expansion into new markets. According to Verified Market Research, the BaaS market was valued at $356.26 billion in 2020 and is projected to reach $2.3 trillion by 2028, growing at a CAGR of 26.33% from 2021 to 2028. Likewise, a study from Gartner Research says that 62% of banks viewed creating new products and services in partnerships with fintech operators as a high priority, and 42% placed that same high priority on collaborating with nonbanking startups to bring in new services.

Poor Synchronization Hinders Onboarding Process

Embedding financial services into commonly used corporate platforms requires many more systems, processes and stakeholders to be synchronized. This intricate web of relationships, however, also leads to a multitude of systems that contribute to knowledge gaps for customers and team members. In fact, the top frustration businesses described in their onboarding process for a financial service, according to my company’s recent Financial Services Impact Report, was the number of people and organizations involved in their onboarding.

Synchronization, aggregation and collaboration become mission-critical to success. No matter how easy embedded finance makes it to access services, business users have shown little patience with missed handoffs, poor communication or confusing processes. Hence, it’s essential that embedded finance partners orchestrate a seamless experience across all parties. That’s difficult to pull off with existing infrastructure.

Embedded finance necessarily requires an ecosystem of best-in-class partnerships to deliver innovation, but moving business customers between these different stakeholders can be difficult. Our research shows a majority of businesses look for the exit within 48 hours when things go poorly with their financial product or service. An overwhelming 76% of business owners surveyed said they found the onboarding process so complicated they walked away halfway through.

A 2022 Verint study on the state of banking warns that the average Net Promoter Score (NPS), a key indicator of business growth, customer experience or loyalty, for 20 major banks has dropped an average 10-plus points since the start of the pandemic. The study additionally reports that around half of customers who had to resolve an issue with their account or online access said it was harder than originally anticipated.

Similarly, financial institutions are recognizing that their digital services are a problem, too. According to BAI’s Banking Outlook report for 2023, a mere 4% of financial services leaders report that they deliver an excellent customer experience digitally, a decline from a year ago. A much greater 44% of respondents said the digital customer experience they deliver is merely average.

How To Make The Embedded Finance Ecosystem And Experience Successful

Transformation initiatives that go beyond digitalizing the status quo are required to provide a truly transformational journey. Embedded finance and the partners at play will only be successful if they are customer-centric, not just on the engagement layer but through to the systems and back-office processes that power the experience.

While many bank institutions think that their existing digital transformation initiatives have provided a better customer experience, many of these initiatives have created a more complex and unsatisfactory customer journey, trapping information locked in different systems through third-party platforms and amplifying communication breakdowns. To transform this inherent problem, financial institutions need to prioritize expanding visibility, collaboration and communication before customer satisfaction continues to decay.

In order to determine the best course of action, institutions need to first diagnose where the problems occur within their network of services. Hold a journey-mapping session to determine the life cycle of your customer experiences with your organization. Where do customers experience the most bottlenecking? Where are the common drop-off points where information leaves your system and goes to one of your third-party partners? Gather as much data as possible to determine the pain points and caution tape that corrode client trust before spending any time or money on a solution that will not fit the inherent problem.

Many banks are currently investing in manpower to rebuild legacy systems to provide connected experiences within a now complicated ecosystem, providing a seamless end-to-end journey. Building network infrastructure from the inside-out can be costly and time-consuming, but it allows financial institutions to have complete control over what a replacement system can provide for years to come.

As banking institutions continue to complicate, more companies are launching new and unique software to tackle these customer integration issues through automation, analytics, data migration and more. Other institutions are turning to third-party customer experience management (CXM) technology that provides technical support to fix customer journeys through each physical and digital touchpoint to deliver personalized experiences in real time. The new software bridges the gaps between cross-enterprise legacy systems and other third-party partner technologies that impair customer experiences so businesses can collaborate more efficiently within their partner ecosystem.

Conclusion

Embedded finance will continue to gain momentum in 2023, but for organizations to make the most of the opportunity, customer experience must not be ignored. Financial institutions should find the pain points within their customers’ journeys, reevaluate their infrastructure and look for technological solutions to manage the customer integration in order to see the most success from embedded finance.


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