Embedded finance offers a path towards new revenue and customer retention. According to the Accenture Research Global Business Perspectives on Embedded Finance, 47 percent of leaders said "their companies are investing in and plan to launch embedded finance offerings in the near future." Adding financial products requires a thoughtful approach to extend existing core business. Here, Alviere strategy leader Josh Karpen shares his thoughts on aligning enterprise goals and customer needs when offering financial products.
Q: Most financial services programs we launch with our clients don't end up looking exactly like they were first envisioned. What do you see change most over the development of a program?
A lot changes when we work with our clients to launch financial services programs. Fundamentally, all our clients are doing this to support whatever their core business is. And typically, they come to us with a goal in mind, whether it's increasing foot traffic in a retail location, having customers spend more frequently with them, whether it be for flights or hotels, or decreasing churn in a telco space.
And that's really the driving vision for why they're trying to launch financial services. And they really rely on us and the partnership that we're working together on to create the right combination of a financial services program to support those aspirations. Once we sit down and start diving into what their customers are like and how they behave, and the existing relationship with the brand, we uncover the nuances of their specific customer base and can pair different financial services offerings to meet those needs. And so what ends up driving everything is the need to relate to customers and deliver value in a way that resonates with them. And we see a lot of different things change when we have that as the driving vision.
Q: Financial services programs can quickly become more complex. How does your team help clients navigate these later development stages of a program?
My team really helps from a commercial perspective, but let me take a step back and talk about kind of the overall partner selection process. Diving into financial services is challenging and complex. Everything from the technology and partner ecosystem you need to bring these programs to life, to the compliance oversight and operational aspects.
We'll cut that, from the compliance oversight and structure and rigor around what you need to do to adhere to all of the different regulations that are constantly changing all the way through to the business model. We work with our clients starting in very early conversations to align on what the ultimate goal is, and the things that we need to do day-by-day to get there.
For my team specifically that focuses around the commercial structure, not only of the partnership, but also how we're delivering value and quantifying that value to the customer. If you think about a brand who's in retail or in telco or in hospitality, their core metrics are around whatever that business is. What we try to do is help educate them on what these additional financial components mean to their customer and how this new offering in the market can compete, or will be viewed by their customers. Starting from early conversations, and what will evolve over time, we work to have the right product in market with the right value proposition to the customer. We see the acquisition and activity that we're expecting and it really drives value back to your brand from a revenue perspective.
Q: If you could recommend three things that a company should focus on to bring a successful financial service or product to market, what would they be?
The number one thing is their customer. And it's what they're already focused on, but in this case, it's customer value. Consumers today have more options than ever before to choose between financial services providers. And what's unique about embedded finance is the synergies between the financial service and your brand create a unique value proposition. Focusing on who are your customers, what is their experience today, and what are their expectations, allows us to think holistically about what customer value we're delivering, and in what form that value is being delivered. That’s the first thing that brands should be thinking about when launching financial services or new financial programs.
Number two related to that is the user experience. You want it to feel like it's your brand. You don't want it to feel like this is an entirely new journey for them to go through. And so thinking about their expectations and their needs and how those are evolving and the user experience that we're providing to deliver the financial service is key to see the right adoption and the right activity that we're expecting in these programs.
Lastly is a little bit forward-thinking, but it's about the product roadmap. Consumer preferences and expectations are changing frequently. And so how are we thinking about what's to come to make sure that we keep the product relevant and keep delivering the value that we focused on as a key pillar. Because the last thing you want is to deliver a product in market that crushes it for three years, and then all of a sudden customers are expecting X, Y or Z, and you can't deliver. Working with a tech forward provider, and an innovator in the space allows you to keep the foot on the gas, on the cutting edge of innovation to make sure that if there's new technology or if consumer preferences change, you're able to provide those services and keep those customers and continue to deliver value not only today, but as your consumers evolve and as your brand continues to evolve in the future.
Q: How do you recommend a company holistically approach expanding their business with a co-branded debit card vs. another card-based loyalty program they may already have in market?
The first thing to think about is the customer offer. What is the reward that the customer will get for signing up for this product, and how will they earn those rewards. There are really two types of rewards. It's the rewards from everyday purchases savings and merchant-funded offers linking their direct deposit. There are also the rewards from your brand whether it's increased loyalty status, or early access to merchandise, or discounts on purchases with your brand.
With a debit product you can use the same product to go after a few different customer segments. The first and most obvious one is those that are interested in financial services, but don't qualify for a traditional credit card. They are actively saying, I want this service from you, and the bank is actively saying I can't provide it. So there's a clear path to go after those customers. Then there are others, maybe it's younger generations who have creditworthy scores but prefer debit over credit, or your most loyal customers who are looking for that additional way to earn loyalty points. Maybe they continue spending with the credit card, but look to perform some of the other activities that we discussed around the value proposition whether it's savings or linking their direct deposit. What we try to do across all of our co-branded debit programs is to start with the value proposition for all of these different customer segments, and then find the right way to connect with each of them to continue to create meaningful touchpoints throughout the life of their relationship with your brand.
Q: What is the goal of embedded finance?
To date, most embedded finance has been putting a label or a brand logo on an existing financial service and calling it embedded finance. But I think where this whole thing is going is truly embedding the experience of the financial service, similar to what Uber has done in their payment flow of requesting a ride and changing the entire way that a customer behaves.They are now seeing differentiated value through the use of financial services.
Uber is a concrete example, we get that. But if you're sitting there thinking, what can my brand do? It doesn't always have to be the most consumer-forward option. If you have a customer base that is constantly going next door to remit money, you have an opportunity to seamlessly put that flow into their existing experience. Or it's something on the backend where you're streamlining the payments between your brand and vendors or providers to create less hassle and less back office work required to perform your money movement and reconciliation requirements. I think where embedded finance as a whole is going is to this more seamless experience where customers may or may not know that there's a financial service in the mix, but they know they're getting a better experience. And the tool that's providing it, or the vehicle that's delivering the better experience, is a financial service because of how intertwined it is with the brand.
