Can embedded finance change private banking for the better?

Embedded finance is the latest theme taking financial services by storm, offering convenience to customers wherever they need it. How does embedded finance link into the personal world of private banking? Patrick Brusnahan writes

Embedded finance is looking like an incredibly lucrative opportunity.

According to Bain & Company, revenue opportunities from embedded finance will surge from $21bn in 2021 to $51bn in 2016. In addition, the transaction value of embedded finance will increase by $7bn in 2026 and account for 10% of financial transactions in the US.

In addition, embedded finance-driven business lending is set to grow from $200m in 2021 to $1.3bn by 2026 with a whole new set of players entering the fold.

Adam Davis, associate partner in Bain & Company’s fintech practice, said: “Embedded finance has quietly become a significant part of the way consumers and businesses make payments and access funding. In the years to come it will have a transformative effect on the relationship we have with our finances, removing friction from the sector and making financial services more contextual, accessible and helpful.”

AAZZUR and embedded finance

The crucial word when it comes to embedded finance is “contextual”, according to CEO and co-founder of AAZZUR, Philipp Buschmann.

Speaking to PBIhe says: “The way to capture the customer would be to offer them contextually the products that you’d want.

“We noticed that there’s a lot of amazing products, people don’t know about them, and they don’t use them. Obviously, you would use them in the apps and websites that you use. We knew that these products that are out there would have amazing benefits to customers, websites and apps, challenger banks, whatever, if they were offered, when you need them.”

AAZZUR claims to be the company to offer this contextuality. It started its journey three years ago and now has a team of 15-20 people with a headquarters in Berlin and a presence in the UK.

“It became our mission to democratize financial products,” Buschmann continues. “And my vision is that banking and wealth management are important, but where that exchange happens will change.”

He states: “People don’t go to the branch. They do online banking, and soon they will not do that much online banking. And in fact, I think it’s already happening.”

But how does this fit into wealth management and private banking? Embedded wealth management services can be used in “a lot of financial applications”.

Buschmann says: “Embedding wealth products is something for financial communities, for challenger banks, for saving plans and these kinds of things. Embedded lending, especially in the SME, space, is starting to happen on a lot of platforms.”

Speaking on the mentality you need to have to be a fintech and cause disruption, the CEO states that you have to be “very stubborn”.

Buschmann concludes: “You have to constantly ask ‘why is this done this way?’

“We’ve decided that we are not a better this. We are not a better that. We are connectivity.”