Integrated finance: what is old is new
Adam Cohen, chief executive of the company at Payoneer, told PYMNTS that integrated finance is nothing new: “When you think about it, integrated finance is a pretty old concept, and it has been around for decades. “
Airlines and retailers have been running loyalty cards and programs for quite some time, where the payments and financial enticements of purchasing a service or product had their appeal in a world outside. line.
At a high level, Cohen said, integrated finance can be defined as the use of application programming interface (API) -based banking and payments services to integrate financial services into other environments and ecosystems. , especially online ecosystems.
“It’s the merger of a non-financial service provider, like Shopify or Amazon, with a financial service like payment processing, loans or insurance,” he said.
Another way of thinking about integrated finance: a brand “praises access” to the tools and services offered by integrated finance providers, using them to build its offerings without investing in the technological basis of those services or in compliance – accelerating thus time to market.
Cohen noted that integrated finance was driven by the same trends that led to digitalization. Consumer behavior, of course, has changed as more people shop on digital channels than ever before amid the pandemic.
As a result, companies have had to rethink all of their value chains and what they see as their core business. Cohen said they need to re-examine their historic business and develop a strategy for their digital presence – and maybe they’re investing in integrated finance as part of that.
See also: Consumer and merchant appetite for efficiency drives second wave of payment orchestration
Another trend, he argued, has been the rise of alternative financial service providers, including challenger banks and other types of FinTechs and payment service providers (PSPs). Banking as a service, he said, helps businesses better manage their own operations.
More and more open to data sharing
“Consumers and businesses are increasingly open to working with non-bank institutions,” he said. As a result, these companies have more access to customer data than ever before, which is critical for financial services companies to market to consumers, perform Know Your Customer (KYC) checks, and ensure compliance or risk. financial.
As Cohen said of the financial services ecosystem as a whole, “You need to at least make it easier to access data, but you also need to do it in a controlled manner.” In this context, he said, data laws such as the General Data Protection Regulation (GDPR) in Europe and other parts of the world help define how data accountability is respected and consumer rights when it comes to their own data – the right to delete it, for example.
“It gives consumers the confidence that they can provide data and that others can use it.” [safely]Rideshare companies like Uber and other platform companies have earned that trust and are keeping it, with payments built into the mix.
Direct-to-consumer businesses are also looking to integrate payments to ensure a smooth customer experience – a key part of their strategy based in part on a goal of diversifying into new markets – and away from markets.
“They want to control their own destiny,” Cohen said, “and my bet is we’re going to see more partnerships. [with providers] and more sellers taking the direct-to-consumer route.
Read also: Payment orchestration improves conversion rates and merchant margins