PUBLISHED DATE: 2025-08-13 12:56:18

2024 Guide to Next.
ISSUE 3: FINANCIAL SERVICES

Table of Contents

Embedded Finance: Unleashing the Potential for Future Growth

Embedded finance (EF) has emerged as a transformative trend in the financial services industry over the past few years, with its mainstream attention skyrocketing in the last two years. By integrating financial services into non-financial platforms and experiences, embedded finance aims to redefine how we interact with money, payments, insurance, and banking.

Embedded finance refers to the integration of financial services and products into non-financial platforms or applications, allowing customers to access financial services seamlessly within the context of their everyday activities. It essentially means bringing banking and financial services to where customers already are, rather than requiring them to visit traditional financial institutions (like 'Buy Now, Pay Later' (BNPL) services).

Traditional financial institutions and challengers have the power to provide consumers with a frictionless financial future. But how can banks seize this opportunity and create a clear strategy that reshapes customer experience and drives growth?

Key Factors: The Rise of Embedded Finance

The market opportunity for embedded finance is significant and has been rapidly growing in recent years. Here are some key factors contributing to its rise:

  1. Digital Transformation: The increasing digitization of various industries, such as e-commerce, ride-sharing, food delivery, and others, has created opportunities for embedding financial services. Digital transformation has lowered the costs of digital strategy integration, removing a traditional barrier to the embedding model. By integrating payment processing, lending, insurance, and other financial services into these platforms, businesses can offer a more comprehensive and convenient experience to their customers.
  2. Enhanced Customer Experience: Embedded finance simplifies financial transactions by eliminating the need for users to switch between different apps or platforms. It streamlines the process and provides a seamless experience within existing products and applications, increasing customer convenience and engagement. This leads to increased product sales, service usage, and customer growth.
  3. Access to New Customer Segments: Many non-financial companies, such as retailers, marketplaces, and technology firms, have a large customer base and deep insights into consumer behavior. By integrating finance use cases through software, they can leverage this customer base and extend their reach into new segments, including underbanked or underserved populations.
  4. Monetization Opportunities: There is potential for companies to generate additional revenue streams beyond their standard offerings. By partnering with financial institutions or leveraging fintech solutions, businesses can earn fees or commissions from transactions, lending, insurance, or other financial activities conducted through their platform.
  5. Innovation and Competition: Fintech startups have been disrupting the traditional financial services landscape by leveraging technology and offering user-centric solutions. Traditional industries can stay competitive by adopting similar strategies, leveraging fintech innovations, and enhancing their value proposition.
  6. Regulatory Advancements: Governments and regulators have been adapting regulations to encourage innovation and competition in the financial sector. Open banking initiatives, which promote the sharing of customer data securely between financial institutions and third-party providers, enable the development of embedded finance ecosystems.

The Embedded Finance Opportunity for Incumbents

The rise of embedded finance is not just a threat to traditional financial institutions—it’s also a significant opportunity. Incumbents can leverage their existing strengths, such as regulatory expertise, risk management capabilities, and established customer trust, to play a central role in the evolving ecosystem. By partnering with non-financial companies or developing their own embedded finance solutions, incumbents can tap into new revenue streams, expand their customer base, and remain competitive in a rapidly changing landscape.

To succeed, incumbents must be proactive in identifying and prioritizing embedded finance use cases that align with their strategic objectives and customer needs. This requires a clear understanding of the market, a willingness to experiment with new business models, and a commitment to building the necessary technology and partnership capabilities.

Embedded Finance Capabilities Needed for the Future

In their pursuit of the “next” phase of embedded finance, financial institutions must focus on developing the following capabilities:

Embedded Finance: Seizing the Opportunity

The market opportunity for embedded finance is vast, with the potential to impact multiple sectors. It ranges from small businesses integrating payment processing to large platforms offering a full suite of financial services. The size of the opportunity can be seen in the valuation of companies operating in this space, as well as the investments and partnerships being formed between fintech startups, established financial institutions, and non-financial companies.

Overall, embedded finance represents a powerful trend that enables businesses to enhance customer experiences, drive revenue growth, and reach new market segments by seamlessly integrating financial services into their existing platforms or applications.

To capitalize on the potential of embedded finance, incumbents must focus on key areas to differentiate themselves and scale effectively. There is a clear roadmap for banks to seize this opportunity:

  1. Define Their Target Market: This is both in terms of partners and customers, to identify opportunities for differentiation and scalability. This will enable financial institutions to align their efforts and resources toward developing compelling embedded finance propositions.
  2. Think Hard About Viability: Banks must carefully evaluate the effort required to open up their capabilities and scale effectively with partners. This assessment should take into account the potential ROI and the overall sustainability of embedded finance initiatives.
  3. Build a Comprehensive Capability Strategy: Banks should identify which parts of their technology stack and operating model are ready for BaaS integration and determine areas that require strengthening through internal development, partnerships, or acquisitions. The goal is to create a robust and adaptable infrastructure that aligns with the broader financial institution’s system modernization efforts.

Next Starts Now

Embedded finance holds tremendous potential for reshaping the financial services landscape, offering innovative customer experiences and unlocking new revenue streams. We believe that those who are early to market stand a better chance of succeeding. Publicis Sapient can help financial institutions drive successful adoption and build modern architecture to pave the way for a future where financial services are seamlessly integrated into our everyday lives.

Contacts:

Learn more at publicissapient.com/FS

Super Apps: A New Wave of Digital Disruption in Banking

In recent years, the concept of a “super app” has emerged as a disruptive force in the mobile/smartphone industry, particularly in Asia, where platforms like WeChat and Alipay have transformed the way people interact with digital banking.

Super apps are multi-functional, all-in-one digital platforms that can integrate a wide range of services delivered directly to consumer smartphones. But can this one-stop shop super app concept translate to banking apps?

The Rise of Super Apps

Surprisingly, the concept of super apps isn’t entirely new; the idea was introduced by BlackBerry’s founder, Mike Lazaridis, over 10 years ago. With consumers leading the charge on a mobile-first future, the demand for an all-in-one platform has continued to evolve, and looking ahead, in 2024 demand will continue to rise as will the level of complexity needed by customers from digital banking apps.

The success of super apps is convenience and simplicity for consumers. As an all-in-one platform, users can use the app for messaging, shopping, transportation (like Uber and Lyft), food delivery, and paying bills. The question remains: with the number of apps downloaded on consumers’ smartphones growing daily, can all consumer needs really fit under one umbrella?

The Future of Financial Super Apps in 2024

U.S. Financial Service App Usage:

Sources: Daxue Consulting; Finder; Associated Press; Boston Herald; Global Payments

Mobile Banking is a Right, Not a Privilege

Mobile banking is no longer a luxury, as more than half of consumers are using a full-service banking app (with even more taking advantage of digital wallets).

Even so, consumers are struggling to manage their finances across multiple banking platforms, which is something the super app is trying to solve. The convenience factor of a one-stop shop plays a vital role, offering 24/7 access, personalized experiences, and enhanced security—all of which have continually attracted consumers to seek out alternatives to traditional banking.

The Impact of Super Apps in Banking

This all-in-one solution provides a broad range of services within a single app, which can help financial institutions enable:

  1. Convenience and Simplification: Super apps consolidate multiple services and functions into a single platform, eliminating the need for users to switch between different apps. This streamlines the user experience and makes it more convenient, saving time and effort. Instead of downloading and managing several individual apps, users can access various services and perform multiple tasks seamlessly within a single app.
  2. Enhanced User Engagement and Retention: Super apps provide a compelling reason for users to spend more time within the app. By offering a wide range of services, these platforms can keep users engaged, encourage frequent usage, and increase user retention. The more time users spend within the app, the more opportunities there are for generating revenue and delivering personalized experiences.
  3. Network Effect and Ecosystem Expansion: Super apps often create an ecosystem of services and products that complement each other. As more users join the platform, the value of the app increases for both users and service providers. For example, a messaging app with integrated financial services can enable users to send money to friends, make payments, and access other financial products. This network effect drives the expansion of the ecosystem, attracting more users and service providers to join the platform.
  4. Cross-Selling and Monetization Opportunities: Super apps can leverage the vast user base and data they accumulate to offer targeted advertising, cross-selling opportunities, and personalized recommendations. By understanding user preferences and behavior, these apps can present relevant products and services, leading to increased conversions and revenue. Additionally, super apps can earn revenue through commissions or transaction fees for the services offered within their platform.
  5. Financial Inclusion and Access to Services: Super apps, particularly in emerging markets, can play a crucial role in providing access to essential services for underbanked or underserved populations. By integrating financial services, users can perform banking transactions, access loans, make payments, and more, all within the same app. This helps bridge the gap between traditional financial services and users who may have limited access to physical bank branches.
  6. Innovation and Disruption: Super apps drive innovation by pushing boundaries and exploring new possibilities. These platforms often collaborate with third-party developers and service providers, fostering a vibrant ecosystem of innovation. By opening up their platform to external developers, super apps can introduce new services, features, and integrations that enhance the overall user experience.

The super app model is not without its challenges. For banks, the biggest hurdles are:

  1. Data privacy and security: With so much sensitive information being shared and stored, ensuring robust data protection and compliance with regulations is paramount.
  2. Integration complexity: Bringing together multiple services and partners into a single platform requires significant investment in technology, infrastructure, and ongoing management.
  3. Competition: Tech giants and fintechs are moving quickly to capture market share, making it critical for banks to innovate and differentiate their offerings.
  4. Regulatory compliance: Navigating the complex and evolving regulatory landscape across different markets can be a major barrier to scaling super app offerings.

Next Steps for Financial Institutions

According to Grand View Research, the global super apps market size is expected to reach $426 billion by 2030. Financial institutions will be left with one question: Do they join the party (embed within a super app) or create their own?

Strategy: Embed vs. Develop?

Embed is best for FIs that want to:

Develop is best for FIs that can:

Super apps represent a paradigm shift in mobile application development by consolidating multiple functionalities and services into a single, seamless platform. With their convenience, user engagement potential, monetization opportunities, and ability to enhance financial inclusion, super apps have become a significant trend in the mobile technology landscape.

— Dave Donovan, Executive Vice President, Operations

The Banking App of the Future: A Lifestyle Platform

Whether a bank chooses to embed or develop their own super app, the banking app of the future will focus on personalization and customer-centricity. Advanced analytics and AI-driven insights will enable tailored recommendations. To stay relevant in the market, traditional financial institutions will need to make a decision to provide the back-end for all embedded financial services or develop their own super app to improve customer engagement, increase revenue streams, and promote potential growth.

With all financial products and services living in one place, users will be empowered to make more informed decisions, whether that’s through cryptocurrency or stock trading, lending, credit services, Buy Now, Pay Later (BNPL) services, personal finance management, and beyond.

Next Starts Now

Traditional banks must adapt and embrace the rise of super apps across industries to remain competitive. By investing in the right digital capabilities, banks can drive innovation and transformation in financial services.

It is crucial for financial institutions to anticipate and leverage future advancements, like AI, to meet customer expectations. Publicis Sapient is ready to partner with banks to help them navigate this digital transformation and help drive success in the evolving mobile-banking landscape.

Contacts:

Learn more at publicissapient.com/FS

Where to Play in the Future of Generative AI: Cutting Through the Hype

The financial services industry has witnessed a remarkable shift toward the adoption of artificial intelligence technologies to combat fraud, enhance security, mitigate risk, and optimize customer experience. These tools have allowed financial institutions to improve their “cost to serve” in an operational capacity, streamlining business practices and allowing executives to focus on more strategic initiatives. Further, generative AI gives organizations the opportunity to better understand their customers—and turn those learnings into tailored, personalized experiences.

As organizations increasingly recognize the potential of AI and seek to keep pace with the market, can financial organizations navigate through all the hype surrounding this emerging technology and capitalize on the right opportunities?

‘AI’ as a term was first coined in 1956. For the last couple of decades, it’s been increasingly relied upon within financial services institutions for largely operational use cases, including fraud detection and credit decisioning. Generative AI exploded onto the scene with the fastest viral rate of adoption of any technology—taking just 60 days to get to 100 million users.

The speed of adoption for generative AI has been unprecedented, outpacing even the most successful consumer technology platforms in history. For example, ChatGPT reached 100 million users in a very short time, far faster than platforms like Instagram, Spotify, Facebook, Twitter, or Netflix.

This rapid adoption is a testament to the transformative potential of generative AI, but it also means that organizations must quickly determine where to play and how to win in this new landscape.

AI vs. Generative AI (gAI)

Operational (For the last 20 years):

Creative:

Generative AI is not just about operational efficiency; it’s about reimagining the business model to enable better customer experiences and drive growth.

Business Model Innovation

Creating new innovative propositions for customers that transform the value model.

Generative AI can be applied across the value chain to enable better customer experiences:

While there is an incredible breadth of opportunities to consider, it’s important to have a means of assessing the benefits, as well as the challenges, to prioritize them.

To prioritize generative AI opportunities, organizations should assess both the drivers and barriers for each use case. This includes evaluating the potential business value, customer impact, and estimated savings, as well as considering the complexity of implementation, regulatory and compliance risks, and ethical considerations.

Drivers:

Barriers:

Estimated Savings (addressable): NONE to HIGH
Difficulty to Implement: HARDER to EASIER

Publicis Sapient can help you establish AI incubators using our unique SPEED approach: holistically integrating strategic growth, digital product thinking, next-generation customer experience, engineering, data, and AI.

Generative AI: Evaluate Where to Innovate

Generative AI has the power to shape the future of banking by transforming customer experiences and business processes at scale across different lines of business. While use cases are still emerging on an almost daily basis, the biggest question to keep in mind is not 'what' to innovate within but 'where,' as there will be a big variance in the suitability of opportunities for any financial services institution.

However, with the right strategic approach to generative AI, financial companies can prioritize resources and effectively leverage this transformative technology to create a genuine competitive advantage with measurable impact.

Contacts:

Learn more at publicissapient.com/FS