Embedded Finance News: BaaS, AI, B2B Payments – The Takeaway

Every month we compile some of the most important and interesting embedded finance and fintech news stories and tell you why they matter. Find last month’s issue of The Takeaway here.

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1. Global survey finds financial institutions excited about embedded finance and Banking as a Service

U.K.-based fintech company Finastra released its annual global financial services survey, which found that industry decision-makers are excited about the opportunities presented by Banking as a Service (BaaS).

According to the report, BaaS deployment has jumped globally by 37% year-on-year.

Financial institutions have increased their BaaS investment, due to key interest in buy-now-pay-later, embedded lending, and embedded cross-border payments. In 2023, 48% of institutions globally have improved or deployed BaaS capabilities, compared to 35% the year before. In the United States, that number is even higher, at 64%. 

The Takeaway: Embedded finance seen as integral tools for improving customer experience and increasing sales.

Despite the economic downturn, financial institutions still recognize the importance of investing in key technological areas such as BaaS and embedded finance. 

Banks and financial institutions also recognize that BaaS and embedded finance can help them meet customers where they are. By offering more payment options with embedded banking options, businesses can provide seamless transactions and increase sales.

To find out how vertical SaaS companies can increase revenue through embedded finance products, download the full BaaS for SaaS guide. 

2. Visa launches new advisory practice to help clients harness the power of AI

Visa, which has invested over $3 billion in AI and data infrastructure over the past decade, is launching its AI Advisory Practice to share its knowledge and guide clients through artificial intelligence.

The new advisory practice aims to help clients understand the AI landscape and where it could fit in with their own business goals, including market expansion, product design, customer acquisition, and fraud prevention. 

The advisory practice will tap into Visa Consulting & Analytics’ global network of 1,000 consultants and experts across 75 offices worldwide.

The Takeaway: AI remains top-of-mind for the financial and payments industry.

Visa’s formation of an AI-focused advisory group underscores the prominent role technology is currently playing in the financial industry. 

The use cases for AI are varied, ranging from internal improvements meant to help employees streamline their work processes, to analyzing customer habits to provide more personalized products and services. Notwithstanding the potential to improve processes, financial institutions should remain cognizant of risks presented by this new technology to its respective organization.

Want to learn more about the future of AI in financial services?  Listen to the CEOs of Cable and Treasury Prime discuss it on our fintech podcast ChatTPE.

3. New report shows discrepancy between fintechs and customer expectations

A new report between PYMNTS and embedded payments company Ingo Money found that there are some discrepancies between the products and services fintechs offer and what customers actually want.

The report found that while fintechs tend to focus on convenience and customer experience as their top selling points, consumers actually want fast transactions and more fund transfer options.

When it comes to moving funds, 37% of fintechs believe that customer experience is the most common problem for deposits. However, 41% of customers who experienced issues depositing money said that speed and the guarantee of good money were their primary issues, and 30% said the same about moving funds out.

The Takeaway: Truly understanding and addressing the customers’ needs will lead to greater customer satisfaction.

Embedded finance can help businesses and financial firms meet their customers’ needs – but only if they actually understand what those needs are. 

While fintechs are pushing convenience and customer experience as key features, consumers place more value on speed, quicker access to funds on-demand, and having a wider array of fund transfer options. 

To learn more about how to reduce payment friction for customers through embedded finance products, read our blog. 

‍4. Leading payroll company ADP announces collaboration with B2B payments fintech

Leading human capital management company ADP, which provides solutions for payroll and HR, announced a collaboration with global B2B payments fintech, Convera. 

Through this, ADP will be able to streamline payments and payroll processes by managing it all through one integrated platform, while delivering globally accessible services that are compliant with local and international statutory and regulatory obligations.

This announcement comes on the heels of ADP’s new payroll solution, ADP Enterprise Payroll, which lets organizations customize their payroll processes to meet their specific needs.

The Takeaway: Payroll payments, especially in vertical labor markets, are ripe for embedded finance innovation.

With a tight labor market, faster and more reliable payroll services are key to employee satisfaction. And in vertical labor marketplaces, instant wage access can give businesses a competitive edge in attracting and retaining talent.

While labor marketplaces may already offer similar services, they can be expensive and inconvenient. Embedded banking can offer scalable and cost-effective instant payouts to these labor marketplaces. 

To read more about how vertical labor marketplaces can benefit from embedded finance, read our guide.

5. Treasury Prime announces partnership with Effectiv to bring fraud detection to enterprises and banks

Treasury Prime, a leading embedded banking software company, announced its strategic partnership with Effectiv, a fraud and risk management platform for financial institutions and fintech companies. This collaboration will empower companies and financial institutions within Treasury Prime’s multi-bank network to leverage Effectiv’s transaction monitoring solution, enabling customers to significantly reduce fraudulent transactions and enhance risk management. 

The Takeaway: The proliferation of real-time payments increases the need for sophisticated fraud and risk management technology

Given the heightened regulatory scrutiny and rise of fraudulent incidents in the financial sector, transaction monitoring for banks and fintechs has become more critical than ever. Effectiv’s fraud, risk, and compliance platform aim to prevent fraud at every step of the journey, from onboarding new customers and businesses to ongoing and real-time transaction monitoring. The company’s transaction monitoring solution identifies and mitigates at-risk transactions by leveraging AI to analyze patterns to detect anomalous fraudulent behaviors, reducing risk of financial loss and reputational damage.

“Over the past year, we’ve seen a rise in fraud with real-time payments. As banks get ready to adopt FedNow and AI fraudsters increasingly get more sophisticated, it’s critical that fintechs and banks invest in technology that can improve their security posture,” says Ravi Sandepudi, CEO and co-founder of Effectiv. “By partnering with Treasury Prime, we can provide more fintechs and banks with the tools they need to help manage risk at every step of the transaction.” 

Effectiv is one of a full slate of compliance partners that have joined Treasury Prime’s growing partner marketplace. Find out more about the partner marketplace.

Wondering how embedded banking could help your business? Contact Treasury Prime — we have a true multi-bank network, the deepest bank core integrations, and extensive compliance experience. Read more about our $40 million Series C Funding and why Tearsheet named us the Best Banking as a Service company for the second year in a row. Talk to the best embedded finance team in the industry.

Additional embedded finance examples:

Launching the First Digital Community Bank for Black Entrepreneurs

How Wagestream is Helping Workers Achieve Financial Well-Being with Embedded Banking

Harnessing the Power of Embedded Banking to Build New Revenue Streams