The imminent dawn of 2024 heralds a potential note of significant transformation in the sphere of financial services, with corporate embedded finance at the core of this anticipated evolution. A set of insightful predictions reveal the key developments expected to emerge in the fintech and embedded finance realm within the year.
Marking a fascinating prospective trend, corporate embedded finance refers to the digital process of seamlessly integrating financial services into non-financial products and services. Eduardo Martinez Garcia, CEO & Co-Founder of Toqio, an embedded finance platform, predicts a robust acceleration of this integration process for the imminent 2024. He explains, "Corporate embedded finance platforms will play a key role in this growth, as they enable businesses to embed financial services into their own offerings, quickly and easily." The evolution of finance to embrace this concept is poised to empower businesses, blurring the lines between traditional and digital financial services. Martinez Garcia is confident that the success of embedded finance in the consumer space will spill over into the corporate realm.
The burgeoning growth of fintech is likely to be accompanied by a heightened oversight from regulators, aiming to restrict misuse of the increasingly powerful tools in finance and ensure safer practices. "Embedding finance platforms will need to comply with these new regulations in order to ensure that nobody can take advantage of the great tools that are being produced", explains Martinez Garcia. The increase in recent years is seen as a response to a series of financial service providers' missteps, necessitating stronger regulations.
With recent advances in technology, fields like artificial intelligence (AI) and machine learning (ML) are poised to cascade into the realm of embedded finance through 2024. Martinez Garcia envisions a slow and steady integration of such technologies, both by fintech companies and corporate embedded finance platforms. He observes, "Those two technologies, when linked to data science, will therefore be key differentiators in the future."
Added attention to financial inclusion is expected to rise in the upcoming year, with embedded finance platforms focusing on expanding accessibility to financial services. Martinez Garcia predicts "Brands will seek to offer customers and partners more financial product options when banks will not or cannot engage, such as turning down a loan based on traditional scoring methodologies or opening up lines of credit in light of restricted cash flow."
Interestingly, traditional banks seem to be gradually adapting to the new wave of financial transformation, with changing customer expectations and digital transformation driving this shift in momentum. "Large companies are becoming the new disruptors," notes Martinez Garcia, explaining the more strategic role of banks, which he believes involves analysing data from a multitude of sources, providing meaningful risk assessments. Concurrently, fintech companies and traditional banks will reposition themselves within the newly terraformed financial landscape.
Finally, by the close of 2024, embedded finance is expected to edge significantly closer to becoming an industry norm, bringing a host of innovative changes across the sector. "It’s the year corporates will truly become banks, or at least bank-like... the year that will end with corporations having recession-proofed their revenue streams through diversification... where we'll see corporates capturing new revenue by offering financial solutions throughout their operations," concludes Martinez Garcia.