Open finance and the future of the payments industry; Cross-border payments: Money transmitters vs Payment aggregation; Breaking it down: key pain points in client onboarding;
Welcome to this week’s Fintech Wrap Up, where we’ll explore the transformative power of open finance, delve into the rise of embedded finance ecosystems, and uncover the latest innovations in cross-border payments.
Insights & Reports:
1️⃣ Open finance and the future of the payments industry
2️⃣ Relationships between different Embedded Finance stakeholders
3️⃣ Breaking it down: key pain points in client onboarding
4️⃣ Interoperability Scenarios for Fast Payment Systems and CBDC Systems
5️⃣ Cross-border payments: Money transmitters vs Payment aggregation
6️⃣ How are banks investing in cross-border payments?
7️⃣ Fintech Plaid’s Product Stack
8️⃣ The landscape of financial services super-apps
9️⃣ Revolut Co-Founder Nik Storonsky Hints at US Banking License Application
TL;DR:
The latest edition of Fintech Wrap Up is here, let’s dive in!
The payments industry is undergoing a massive shift, with open finance poised to reshape how we transact. Building on the success of open banking, open finance is fueling innovations like account-to-account (A2A) payments and digital wallets, which continue to dominate the e-commerce landscape. A2A payments are gaining traction thanks to standardized APIs and seamless integrations, while digital wallets are projected to grow at an impressive 15% CAGR through 2027. With open APIs simplifying wallet top-ups and enhancing security, it’s no surprise they’re winning over consumers and businesses alike. Meanwhile, BNPL services are becoming smarter and more personalized, leveraging open data to improve credit assessments and offer a more tailored experience.
Embedded finance is another game-changer, with embedders, providers, and enablers collaborating to integrate financial services directly into everyday platforms like e-commerce sites, apps, and even social media. Whether it’s BNPL on a retail site or savings accounts embedded into an app, the goal is a seamless experience that brings value to users without added complexity. This ecosystem is redefining how financial products reach consumers, making them more accessible and integrated into our daily lives.
Client onboarding is still a challenge, especially for corporates. The process can take up to 120 days, with manual bottlenecks, fragmented workflows, and complex risk assessments slowing things down. By contrast, individual onboarding is increasingly automated, highlighting the potential for technology to transform corporate onboarding too. With automation and streamlined processes, banks and fintechs can drastically reduce onboarding times and costs.
On the cross-border payments front, money transmitters like Western Union continue to provide accessibility for the unbanked, but newer players like Wise are disrupting the space with faster, more affordable digital solutions. By reducing intermediaries and leveraging local accounts, these aggregators are setting a new standard for speed and efficiency. Banks are also investing heavily in this space, with Citi leading in cross-border payments investments and blockchain innovators like Fnality and Form3 attracting major backing.
The rise of financial super-apps is another big story, blending banking, payments, lending, and investments into a single platform. Apps like Revolut and WeChat are making it easier than ever to manage money, track expenses, and make payments, all in one place. Features like QR code payments and budgeting tools are driving their popularity and setting a high bar for user convenience.
Insights & Reports
Open finance and the future of the payments industry
Open finance to bolster the payments sector similar to open banking
The payments industry is poised for significant transformation under open finance, which will entail substantial revenue increases. However, the industry is also facing intense competition from a broader range of financial industry players, including FinTech startups, traditional banks, card networks, and super apps. This heightened competition will drive consolidation in payment usage, with customer preferences playing a critical role in shaping market dynamics. To thrive amidst this competitiveness, institutions must focus on meeting and anticipating customer needs and making seamless and integrated payment experiences essential. As the industry evolves, select payment solutions are also gaining traction by aligning closely with these changing customer expectations. This alignment not only reinforces their importance but also highlights the promising growth projected for these solutions.
Account-to-account payments (A2A) to gain popularity
Despite their existence prior to open banking, A2A payments gained mainstream traction with the advent of regulated third- party financial service providers. Regulatory developments such as the SEPA Payment Account Access scheme invite any EU bank or regulated FinTech to offer A2A payments and data services via APIs, benefiting merchants and consumers alike.
Open finance data sharing will further expand A2A models, enabling common APIs for payments between service providers and fostering an interconnected ecosystem of instant payment apps. Strong customer authentication measures and standardised APIs will facilitate seamless payments across
platforms.
Relationship between different Embedded Finance stakeholders
🔹 Embedders
Embedders are players or platforms that provide non- FS services and integrate financial products or services from providers into their own platform and their customer’s transaction journeys. These can be e-commerce platforms, mobile applications, social media networks, platforms for gig workers or any other firm that wants to offer FS to its customers without having to establish themselves as a full-fledged FI.
The APIs from FS providers are integrated by embedders to embed financial products and services into their existing customer journey. This makes the overall customer experience more seamless while also offering a composite value proposition.
For example, a retail e-commerce platform can integrate a BNPL service from a lending provider, allowing customers to finance their purchases directly through the e-commerce platform without leaving the website.
🔹 Providers
Providers are Fls, FinTech firms or other companies that provide financial products and services like banking, payments, lending, insurance or investing. The licences and regulatory permission required to provide these offerings are typically held by the providers. Providers in the EmFi space make their APIs available to facilitate integration with third-party platforms and applications.
For example, a bank might offer an API that allows a retail app to offer its customers the option to open a savings account directly within the app, or a payment service provider might offer an API that enables a ride- hailing app to process payments.
Curated News
Revolut Co-Founder Nik Storonsky Hints at US Banking License Application
Stornosky told an audience of investors in Helsinki on Wednesday the US market was more credit card-driven and it’s hard to compete without that option, and its ability to earn interchange fees. “In the US, you need to be credit driven. So in the US, we need to have a banking license to launch a product,” he said.
