Ushered in by open banking and encouraged by evolving customer behaviours amid the pandemic, embedded finance is a burgeoning trend in the fintech world.
Embedded finance, the integration of financial services into the apps, websites or business processes of non-bank brands, has introduced a new model of financial services distribution and new opportunities for ambitious companies to influence and enhance the financial lives of customers.
Creating a financial product is a serious undertaking that requires a significant investment in time and resources. This is particularly true for brands that don’t have much prior experience in the fintech arena. They must first get to grips with developing and launching a new product that has limited overlap with their core business before finding a way to navigate a complex legal and regulatory landscape.
When it comes to handling someone’s finances and data, compliance and regulation must be strictly followed at every level, both to bolster consumer trust and avoid penalties.
The responsibility for this compliance ultimately lies with the providers, though there should be collaboration and transparency between financial institutions and regulators to help providers to meet regulatory standards.
In addition to meeting regulatory requirements, there are some other challenges to be aware of before entering the world of embedded finance.