The future of fintech is here, and to empower enablers and partners, it is imperative to understand integrated financial products and the methodology used to identify and organize system requirements. Financial products have a wide and varied scope that includes loans, insurance, mutual funds, stocks, digital gold, and more. (This article will not cover services such as payments, opening savings or bank accounts).
There is enormous potential in integrating and integrating financial products into scenarios where content and context live. We are on the cusp of a new era in fintech, where companies are beginning to integrate financial services into their offerings to attract and retain customers. We will eventually see a growing appetite for bundled integrated fintech products where platforms offering complete solutions with financial capabilities will be what customers prefer. Integrated financial products can go beyond apps or financial institutions or add other products for cross-selling or up-selling purposes. Seemingly unrelated, non-financial use cases are also ending up integrating financial products into their workflows, e.g., chat, e-commerce, SaaS, lifestyle, content, and more.
Loans to the BNPL (Buy-Now-Pay-Later)
What started in e-commerce – converting purchases into monthly installments for customer convenience – has found many takers, even outside of traditional setups that require EMIs. BNPL (Buy-Now-Pay-Later) facilities have gone beyond a physical product and expanded into experiences such as vacations and weddings. Enabling loans via WhatsApp using credit protocol infrastructure, such as the OCEN framework, would make loans available to people without having to visit banks. The same methodology can be extended to use cases such as drivers or delivery partners who may, in the long run, gain access to loans based on their ratings or income on the respective ridesharing and ridesharing apps. food delivery, thus promoting the financial inclusion of gig workers. .
Insurance is next
We often forget the fact that insurance is an invisible underlying to everything we do; it allows us to take risks, to travel, to innovate, because it provides a safety net, should the worst happen. As BNPL payment options, seamless integrations and customizable financial products are becoming commonplace. Insurance will follow a similar trajectory. It will be better positioned to adapt to context and content while helping clients make effective financial decisions. Bundling insurance into the purchase of products or services leads to better and exciting product use cases and protection against adverse scenarios. For example, missing flight insurance when booking flights, travel insurance when booking rides, phone or device insurance when buying gadgets, etc. This seamless integration is currently being driven by both insurance companies like Acko and infrastructure layers like Riskcovry working with other insurance companies.
Wealth management needs to go mainstream
From a consumer’s perspective, it is important and sensible to associate investing and saving behavior with a catalyst moment such as a purchase, achieving a personal goal, or any other expense, as this will embed the investment disciplined, thus putting more power in the hands of the consumer. Digital gold via APIs has become the entry product for any app looking to start offering wealth management products. Encouraged by use cases such as roundups, spare-currency investing as there is no minimum ticket size for buying digital gold, removes friction around recurring investments and thus drives for easier adoption.
Similarly, mutual funds have become a domestic product due to the ubiquity of investments in them. APIs like Star MF by BSE allow this to happen in any application and use case. The Indian market, however, has yet to see major large-scale innovative workflows. For example, in China, Alipay or Alibaba’s Yuebao has become the largest money market fund by automatically withdrawing funds from customer and merchant wallet accounts. It provides a better transaction experience and higher return for consumers and merchants. This is not just via product workflows, but transaction mechanisms like auto-pause SIPs (for seasonal use cases like farmers) or micro-SIPs (less than Rs 500 SIPs for l investment) or SWP for digital subscription purchases (get Netflix at lower rates) that can drive mutual fund penetration.
Integrated financial products can enable non-brokerage applications to offer trading for stocks and ETFs. Content and media platforms have started using these APIs, making actionable information and content on their stories, articles and pages, advisory and wealth management apps providing services on listed securities without taking a license from brokerage.
Outside of consumer use cases like those above, SaaS and enterprise use cases are an untapped market. For example, if HRMS systems allowed taking out a payday loan up to certain limits, it would speed up the process and avoid judgments. If the payroll software allowed employees to choose to receive part of their salary in stock or debt funds or if the HRMS or tax modules allowed investing in tax saving products such as NPS, PPF, ELSS directly from the portal, this can solve many coordination and discovery problems.
Embedded finance will be to fintech what e-commerce was to the internet – increasingly verticalized and no longer operating in discrete categories.
The author is a founder and CEO, smallcase.
The thoughts and opinions shared here are those of the author.
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