Enhance your core business with financial products

Banks are in the business of holding other people’s money to their benefit. It makes sense, and enterprises work within the confines of a bank’s regulatory environment for good reason. The stark difference is that banks do not operate to serve their clients’ core business. That’s the concern of the enterprise itself. 

The new fintech paradigm supports the enterprise core business while offering new pathways to revenue and retention. Offering banking services like accounts or alternative payments don’t simply serve as operational levers, but advance corporate strategy and innovation.

Innovating with embedded finance impacts the core business by reaching enterprise customers, optimizing internal processes, and improving the lives of employees.

Extend & enhance the customer experience

Here’s an example: In brick and mortar retail, revenue per square foot is a critical KPI (for some, the critical KPI). Any launch, test, or initiative is subject to measurable impact: Did it increase sales per square foot?

Within retail, convenience stores have razor-thin fuel margins, and the game is won via in-store traffic and related purchases. Two key factors are the number of people through the doors, and the amount they spend in the store. Both can be impacted by offering financial products. Borrowing from the Starbucks playbook, consumers could load money into a wallet for prepaid purchases, incentivizing them to return to a store with unique offers when paying by wallet.

Or, for the 25 million Americans who are unbanked or underbanked, cash can be used to send international remittances while in store. Stores benefit from additional traffic to conduct banking transactions, with no or minimal dedicated square footage, plus a share of the revenue on these transactions. For retailers outside of the U.S., customers who pick up their cash remittance in a retail store are highly likely to spend at least some of that money where they receive it.

Streamline internal processes

Another example of impacting the core business stems from the emphasis on internal teams to create operational efficiencies. When all things are possible via technology, enterprises must examine current processes to find bottlenecks or those that cause friction for customers and employees. 

Small improvements like reducing the number of paper checks issued can have outsized impacts not only on direct cost, but on reducing effort and risk. Consider a check that goes missing. The intended recipient contacts the issuing organization to chase payment. The organization’s support teams initiate an internal process to identify the cause and to resolve the problem. Multiple teams are then summoned to cancel the previously issued check, and create a new one. This nightmare cycle of canceling checks, refunding payments, and its impact on customer service metrics is high on the enterprise pain scale. 

Examining the flow of funds — even internally — can lead to efficiencies. These days, holding onto payments longer yields material interest, so paying closest to just-in-time (JIT) adds to enterprise coffers. For businesses that offer rebates or claims through check, offering virtual cards & disbursements saves on overall operational efficiency, expands payment windows beyond standard bank hours to 24/7 capabilities, and offers customers safer options to receive their funds.

Give employees and freelancers fast pay access

Organizations are increasingly looking to earned wage access, or on-demand access to payroll, to improve employee, gig worker, or freelancer retention. Two in three American adults live paycheck to paycheck and employers that offer instant or faster access to wages help talent bridge the time between getting paid and paying bills. Employee retention is boosted at no additional expense to the enterprise. Another avenue is to create demand deposit accounts (DDA) for employees, giving those without traditional bank accounts the ability to pay bills, transfer money, and start saving. Plus, the employer can deposit earned wages to those same DDAs for the employee to have funds immediately available, with no need to wait for ACH settlement.

Stay focused on the core business — and elevate it

When strategy and innovation teams consider offering financial products, impact core objectives is an inevitable requirement. It has to make sense for the enterprise. The question becomes:

How do we leverage fintech to better serve customers and deliver on key objectives?

Written by Alviere