The following was adapted from the Embedded Finance Tracker, produced by Galileo in cooperation with PYMNTS.
Thousands of physical bank branches shut down during the pandemic or reduced their hours. At the same time, bank customers discovered the convenience of mobile banking from home or on the go. As a result, the utilization of digital services has become the predominant way in which most Americans interact with their primary financial institutions. A recent study indicated that 78% of Americans prefer mobile to in-person banking.
This development has presented a considerable challenge for traditional FIs, as they are notorious for operating with antiquated systems and lagging in adopting the latest in technology. While 4 in 5 banks report they will respond to this challenge by migrating their mainframes to the cloud, the reality is that only one third of banks have migrated more than 30% of their applications to the cloud to date.
“While more established banks have generally done an admirable job of building their own digital apps and websites, it’s not surprising their offerings in this area often lag behind those of digital-native providers when it comes to how they look and feel and what they can do,” says Jeff Currier, Chief Technology Officer at Galileo.
The good news is that traditional banks can outsource the building of these digital service needs to an embedded finance solutions provider. This will allow banks to considerably reduce the workload for their IT departments and lessen the strain on legacy systems in general.
“Instead of banks competing with FinTechs in an area where they’re at a disadvantage, banks can partner with FinTechs and integrate specific digital services, such as bill negotiation, data breach and ID protection service or crypto investing tools,” notes Currier.
Banks and FIs will then be able to offer new digital services under their own brand, which will enable them to retain as well as attract new customers. “Banks can embed those services into their own digital offerings to bolster utility and create new revenue streams,” says Currier.
Furthermore, as traditional financial institutions already have detailed historical data on their customers, they are well positioned to customize new digital services according to customer segments.
“Banks can leverage the customer data they already have on hand to ensure the third-party services being offered are relevant and tailored to a particular customer’s needs and wants and delivered in a compelling way within the context of day-to-day banking activities taking place over digital channels,” explains Currier.
Additionally, FinTechs are eager to partner with banks and FIs in an embedded finance collaboration, as they see it as a win-win scenario. Banks can adopt new technologies faster and more economically, and FinTechs get to access banks’ customer bases and distribution channels.
“Both parties — banks and FinTechs — have much to gain by joining forces,” notes Currier.
In the latest Embedded Finance Tracker®, a Galileo and PYMNTS collaboration, learn more on how traditional financial institutions are using embedded finance to provide optimal digital customer service experiences as well as stay current with the latest FinTech disruptors.
Why Banks Shouldn’t Wait on Buy Now, Pay Later Services
With high levels of consumer trust and troves of data on hand, banks are well-positioned to capitalize on the booming popularity of buy now, pay later services.
How BitPay Makes it Easier to Spend Crypto in the Real World
Explore how BitPay, supported by Galileo's payment processing, is transforming digital currency use. Learn about the seamless conversion of crypto to fiat for real-world transactions, and the BitPay Card's role in enabling this shift. Discover financial innovation that caters to both seasoned and new crypto users.
How Qube Money is Enabling the Future of Envelope Budgeting
Galileo supports a number of functions for Qube’s platform, including the movement of funds between qubes, payment authorization, Auth API, and card issuing
4 Ways Your FI Can Deliver Customer-Centric Banking in 2024
Siloed models and disconnected journeys lead to missed opportunities for FIs. Here's how a smarter, tech-based approach in customer-centric banking can create longer-lasting, more profitable banking relationships.
What is an Issuer Processor Platform and How to Work With One?
Learn about the crucial role of issuer processing in electronic payments, the benefits they offer, and the key components involved in selecting one.