The rise of embedded finance as a category is clear. Bain & Company recently estimated that total revenue across payments, lending, banking, and cards platforms and enablers in the US will balloon to $51 billion by 2026.
Enterprises like Walmart, Walgreens, and Boost Mobile have already jumped in to take advantage of the consumer shift from banks to brands.
But with the news of Railsr, the embedded finance startup formerly known as Railsbank, going into bankruptcy protection under a new consortium owner, and recent news of major banks shuddering, enterprises are wary of finding the right financial solution provider that can stand the test of time — and the test of varying market conditions.
Now, more than ever before, is the time for enterprises deploying embedded financial solutions to thoroughly understand the critical factors in selecting a partner for long-term viability and program success.
Security, compliance & licensing
Is the embedded finance partner fully licensed and in compliance with current regulations?
Regulatory licenses provide a crucial safety system that helps ensure the embedded finance provider has a safe and reliable operation as approved by regulators.
Unregulated embedded finance providers don’t carry full regulatory protection for the enterprise delivering financial tools and services, or offer protection for consumers. This leaves customer and business assets, as well as brand reputation at risk.
A fully licensed and regulated vendor provides comprehensive compliance, risk management and security. This means full compliance and support for FDIC-insured bank accounts via pass-through from partner banks, and strict Know Your Business (KYB) and Anti-Money Laundering (AML) standards and processes. Additionally, robust fraud and identity management protocols and PCI & SOC I & II certifications should be in place to safeguard your business, allowing your customers to operate with confidence and peace of mind.
Does your embedded finance provider have Money Transmission Licensing (MTL)?
A license to transmit money is required to maintain regulatory approval and compliance. To protect and grow assets, prevent money laundering, and maintain control of your business’s financial operations, partnering with an embedded financial partner with all money transmission licenses will be critical to success in launching a program.
With the right provider, there is total transparency for any vendor or bank partnership, providing your business with any requested information upfront to establish trust and the legitimacy of licensing and compliance.
Does your embedded finance provider have an active compliance and risk management program?
Licensed entities are required to have robust compliance and risk management, but non-licensed providers have to rely on third-party vendors to fulfill security prerequisites on their behalf. Since different levels of compliance must be met and maintained to operate, this scenario poses a higher risk to your business as the provider may not have a direct relationship with the vendor that they are relying on for compliance.
Your embedded finance provider should have complete compliance and risk management to mitigate risks, protect business assets, and prevent theft and fraud. Full featured, regulated and licensed providers identify third-party risks and take the necessary steps to remain safe and in compliance with applicable regulations.
Is the embedded finance provider, or its partners, under scrutiny or regulatory enforcement?
If you partner with a provider who may be under investigation for regulatory and compliance issues — or is unlicensed — your entire business is at risk of receiving hefty fines, being suspended, or even shut down.
As part of your vendor due diligence, ask directly, or check with applicable regulators or other financial entities to determine if there are pending actions.
Does the embedded finance partner offer a modular platform with a comprehensive set of embedded finance services?
Your business may only be interested in launching one or two financial services to start, offering branded cards for example. However, your customers may want additional complementary products and services. Introducing new services will be limited if a provider is a single point solution. Innovation and growth can be hindered when the functionality or features of the financial services don’t allow for expansion.
With the right provider, you can continue to evolve and support the increasing customer demand for financial services in a phased approach. A platform that offers a comprehensive suite of financial products and services allow for phased expansion without incurring additional implementation or integrations.
Does your embedded finance partner manage all backend software integrations?
The backend complexity is managed through APIs to card networks and payment processing, to accounts, and global payments functionality. Without these integrations via the provider, this responsibility is left to your business. The effort and complexity of building and managing each integration individually will not only extend implementation timelines but also require significant cost, development, management and oversight over time.
A comprehensive embedded finance platform has out-of-the-box integrations across all required services and functionality. Implementation should be clear, straight-forward and well documented, without excessive complexity.
Ownership & control
Who owns and manages the platform and your customer data?
Some embedded finance providers deliver customer data to a third-party bank rather than to your business, limiting visibility into your customers’ spending habits. This means a loss of control over first-party data and an additional layer of complexity for managing data governance and security.
With the right provider, your business maintains ownership and control of your own customer data. Access to this data becomes a vital part of your embedded finance program.
How much control do you have in how your business is represented?
Protecting your enterprise’s reputation and ability to deliver trustworthy services extends to every customer interaction. Some fintech vendors are simply a gateway to additional partners and the back-end sponsoring bank or software. At any point during the engagement process, a customer can be presented with a different — and sometimes unpredictable — experience.
Look for providers that ensure a consistent experience for your customers and partners. Implement and manage all aspects of your program with complete transparency, accountability, to reduce the risk of business disruption.
Are your customers leaving your platform to access financial products via a third-party site?
Using BaaS or fintech platforms to provide financial services to customers often requires customers to enroll and interact via the third-party provider site. Going from your business’ website to an unexpected third-party site introduces friction and may significantly reduce conversion rates. Customers should expect a seamless and consistent experience with a robust embedded finance platform.
Consider a white-label option where you control the entire customer experience (CX), managed via a single integration instead of having to manage the integrations across countless partners.
What is the onboarding and program development plan?
How you onboard an embedded finance provider determines how effective the launch and activation of your program will be. Your provider should provide details and oversee the implementation, launch and rollout plan.
Industry-leading expertise and guidance is required at every step, enabling your program to deliver maximum return on investment.
With the right provider, from program kickoff to implementation, go-to-market, and post-launch support, there should be a project roadmap that outlines the program lifecycle, projected timelines, and shared revenue success models.
An embedded finance provider built for the complexities of the enterprise
Partnering with the best embedded finance provider for your enterprise is a decision that merits due diligence. Including the right people, asking the right questions, and prioritizing the needs that matter most to your organization will have a lasting impact.
Al Alviere, we know that no two enterprises are alike. We’ll partner with your team to determine goals and plan the fastest path to success. As true partners, the Alviere team will work closely with your team to develop a seamless implementation and launch plan, and partner throughout your program.
Take the next step, and schedule your custom revenue impact report to understand how embedded finance can build new revenue streams, improve customer retention, and grow your product set.