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Toward Connected Finance
This post grew out of watching demos at Finovate Fall 2023, in New York. Given that 2023 is the year of AI, it was no surprise that AI played some role in most of the demos and many of the panels.
The main essence I noticed in the demos was their focus on applications that connect to banks to supplement their clients’ financial needs. Many of the FinTech firms seek to provide their systems on a white-label or affiliate means to gain access to bank customers.
My initial assumption is that I was seeing embedded finance, and some of the firms characterized themselves as such. Embedded finance is generally defined as the integration of financial services into systems from nonfinancial businesses.
One of the best examples is the insurance offers that pop up after booking a flight. I first came across the term some years ago in relation to payments, where the payment itself is not really noticeable to the consumer. Uber became the embodiment of that idea, where the payment is part and parcel of the app that booked a ride.
The demos as a whole seemed to be much more than that to me. And anyway, a long-time Finovate attendee told me that while this year’s theme was clearly AI, last year it was embedded finance, preceded by crypto, and by buy now pay later (BNPL) before that.
So what to call this? My staff and I put a lot of emphasis on finding the right term to convey the purpose, uses, and benefits of technology. Labels may be restrictive but they also help people build a mental framework to provide context and meaning that leads to easier-to-understand utility and ultimately better marketing and sales.
I settled on Connected Banking. “Connected” is more understandable and useful than “embedded.” FinTech applications are connected to banking and other platforms and organizations through APIs to provide broader service offerings to customers that would be difficult or impossible for banks to build themselves.
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