Integrated finance is growing in popularity, aiming to attract companies from all industries looking to implement finance solutions for their business.
Loans are and will continue to be an important part of the integrated economy – it’s about customers accessing finance when they make a purchase, whether they’re buying a spa or need fix a faulty pipe in their house.
Embedded lending is point-of-sale financing, but it’s not buy now, pay later (BNPL). It provides access to traditional regulated loan products offered by financial institutions.
This is exactly what Finastra is doing with its new integrated consumer credit solution.
For consumers, this provides more options and an alternative to BNPL, which is often not applicable to high value purchases. For merchants, this allows them to give their customers access to many lenders and their specific products. And for financial institutions, it is access to a marketplace of distributors and merchants to distribute their banking products.
To get a better idea of what it all means and the strategy behind it, I spoke to Angus Ross, Director of Growth and Revenue, Integrated Finance at Finastra. So if you’re still not sure what integrated loan means, we’ve got the answers here.
How would you define integrated loan?
Angus Ross: We define integrated finance from the perspective of the end consumer and the points of context they interact with that banks do not have. These context points include retail brands (e.g. Amazon), ERPs (e.g. Microsoft, SAP), merchant acquirers (e.g. Block, Elavon), etc.
Embedded Finance is the evolution of Open Banking and Banking as a Service (BaaS), both of which focused on unbundling banking products and making them available to non-banking channels (i.e. supply of banking products). Integrated finance goes one step further by focusing on the end customer and the point of consumption (i.e. the demand for banking products).
The relatively short two-year history of BaaS and embedded finance is important, because what you’ve seen in the market over the past few years will inform what you’ll see in the next two. BNPL, low-value, consumer-focused financing, was just the tip of the iceberg. Everyone thinks that if you offer loans at a point of sale, it’s just buy now, pay later – it’s not.
Finastra’s integrated consumer lending offering is a regulated banking product, with all the attributes of responsible lending and a regulated institution that stands behind it, offering loans to an end consumer in a relevant context. It shows you the evolution from a low value BNPL to a higher value, more regulated and rigorous product, and this will evolve to multiple financial providers offering a loan product in a given context, so that the end consumer has a choice .
We call ourselves the Open Finance Orchestrator. We are lucky enough to serve 8,500 banking customers around the world, but we cannot offer a consumer 8,500 offers at his point of sale. Connecting both sides of the network – many retail integrators and many financial service providers – and bringing them all together in a democratized sense is what we see as our role, ultimately for the benefit of the end consumer.
What do you think of traders in this context? What kind of merchants would be currently ideal for this type of partnership?
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