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To Embed or Resell Financial Services: Continuing the Debate

A number of businesses are looking to increase revenue and customer adoption by adding and/or enhancing financial services to their core product offerings. As hard as they may try, most businesses are over their skis when it comes to understanding the total lift of successfully managing all the required tech, compliance, and front and back office operations on their own. It’s not their fault for trying; many legacy finance products offer “pie in the sky” promises of their functionality to solve such business needs. However, many of these legacy players are struggling to deliver on that promise as they work diligently to integrate numerous point solutions that were acquired over the past several years. The result of this growth through consolidation strategy is systems that are neither flexible nor nimble enough to scale to meet their customer’s immediate needs. Rather than attempting to build or resell services, businesses should consider embedding them.


The debate for reselling a product is strong as it may help accelerate go-to market time, but also comes with limitations. Choosing this route builds the resellers asset value and tethers the business to its functionality, breadth and product roadmap; whereas an embedded financial services partner can act more like a utility and serve the specific functions that the business deems necessary, without being pigeon-holed. This is especially beneficial to those product innovators who must have a pulse on market trends to ensure innovations align with their technology roadmap. The need for speed forces product decisions, designs and deployments to keep pace, but this can be hard when their strategy relies too heavily on another company as a result of reselling versus embedding financial services.

The dichotomy is that fast moving, sophisticated enterprises are rarely interested in ingesting an entire platform, not when they already have existing core features either built in house or through a partner. Such investments have largely been a waste of time and money, especially when a company only wants to make turnkey adjustments. That’s the key difference between resellers: Businesses must ingest their entire platform versus embedded financial services partners that take a modular/utility approach to successful product deployments. As customer expectations continue to evolve, having a partner that can configure to almost any use case will help these businesses keep, and often beat, the pace of customer demands. According to private equity firm Lightyear Capital’s Embedded Finance Revenue Forecast report, they predict revenue gains from the embedded finance market will see a ten-fold increase from $22.5 billion in 2020, to $230 billion in 2025. 

That said, the pandemic has forced many businesses to fix things that we all know have been broken for years – to re-evaluate product offerings and determine where to invest so that products and services can bend toward the new normal and cut costs and improve effectiveness while still having a positive impact. In many cases, choosing to embed financial services via a proven, pressure-tested partner seems to have significant advantages over being tied down by reselling another company’s product.
The timeline for this topic is further condensed as the economic environment calls for a sense of urgency. For instance, creating an emergency or crisis fund for employees impacted by the pandemic, natural disasters, or furloughs are timely and high priority needs. Businesses that can pivot to meet changing circumstances will be rewarded. Being able to bring innovative ideas to life in a timely fashion requires technology that is modular to ensure expedited integrations and deployments as well as cloud-native to realize the benefits of true serverless scalability.

In fact, some of the most flexible and configurable fintech platforms have been born in the cloud and leverage that to offer true functions as a service. McKinsey & Company’s 2019 Global Payments Report reinforces that applications and data typically stored on cloud-native platforms tend to allow for better flexibility, scalability, compliance and resilience. But keep in mind, there is a difference between true cloud-native architecture versus platforms that have migrated certain functionality to the cloud. Migrating previously monolithic systems to the cloud may enhance areas of performance or security, but it will not create the inherent flexibility that a cloud-native, serverless system offers.

Additionally, both traditional and neobanks are embracing their roles in enhancing embedded finance services to businesses and consumers, realizing the union leads to bottom line wins through enhanced adoption. These services enrich banks’ profitability, customer stickiness and improve performance.

Though we are under tumultuous circumstances, it’s refreshing to see that innovation and collaboration seem to be headed in the right direction. As the “next” normal demands businesses to react even faster than before to meet unforeseen challenges, they can surely count on the right technology partners to make those big, innovative ideas a reality.

Brad Bialas is CEO of Xformative Payment Systems, a cloud-native issuer processor platform, architected with a unique suite of modular APIs that can be configured to almost any use case.  Learn more at www.xformative.com

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