Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: BaaS, Embedded Finance, API, Digital Banking
Embedded Finance: Banking Meets the Customer
Embedded Finance Research | Nov 6, 2023
Courtesy of Visa Consulting & Analytics
Embedded finance is revolutionizing the way consumers and businesses interact with financial services from lending to wealth management, and embedding them into the very platforms we use daily.
The Visa Consulting and Analytics Team (VCA) has published a report titled 'Embedded Finance - What are the emerging opportunities in this new value chain' covering key players, trends, and various examples where financial services are seamlessly integrated into non-financial digital platforms.
The Essence of Embedded Finance
Embedded finance is the integration of financial functions into environments where they were previously unavailable. Imagine buying a car from an online retailer and getting loan approval on the spot, or a gig worker receiving payments on a virtual card without ever having to visit a bank. This is the power of embedded finance – it brings banking to the customer, rather than bringing the customer to the bank.
See: Marqeta 2023 State of Payments Report: Rise of P2P Payment and Embedded Financial Services, & Hybrid Future?
Key Players in the Value Chain
- Providers: These are typically financial institutions or fintech companies that offer financial products and services through application programming interfaces (APIs).
- Enablers: They are the middleware, offering the necessary software and regulatory support to bridge providers with distributors.
- Distributors: These are the non-financial platforms – such as e-commerce sites, gig economy platforms, or even social media apps – where consumers congregate and transact.
Key Trends
According to Visa Consulting & Analytics, the embedded finance market is poised for explosive growth, with a projected compound annual growth rate of 23.9%, reaching a staggering US$776 billion by 2029. This growth is fueled by three emerging trends:
- Deep Integration of Payment Solutions -> Payment options are becoming more ingrained in the merchant ecosystem, exemplified by Grab's e-wallet, Grab Pay, which rewards users for in-app payments.
- Rise of Unsecured Embedded Lending -> There's a burgeoning demand for unsecured lending, particularly in emerging markets where flexible lending solutions are in high demand.
- White-Label Solutions -> Smaller merchants are turning to third-party white-label solutions for embedded payment systems, allowing them to compete without the need for extensive resources.
Embedded Finance Examples
See: BCG and QED Investors Global Report: Reimagining the Future of Finance 2023
These examples showcase how embedded finance is being utilized across different sectors to provide value-added services, often leading to enhanced customer experiences and new revenue streams for businesses.
- Payments: Shopify Payments allows merchants to accept credit cards directly on their Shopify store without having to integrate third-party payment providers. This streamlines the process for both the merchant and the customer, providing a seamless checkout experience. (See: VoPay Launches VoPay360 – Embedded Financial Technology)
- Lending: Affirm's integration with online retailers enables customers to apply for and receive financing at the point of sale. This allows customers to make purchases immediately and pay for them over time through installment loans.
- Issuance: Stripe Issuing lets businesses create, manage, and distribute virtual or physical cards. This can be used for managing company expenses, enabling online spending for customers, or providing flexible payment options.
- Deposits: Rideshare companies like Uber or Lyft offer drivers the ability to open an account through their app, where they can deposit their earnings. In some cases, these platforms partner with banks or fintech firms to offer these banking services.
- Insurance: Lemonade provides API-based home insurance that can be integrated into real estate websites. When someone rents or buys a property, they can immediately purchase insurance coverage as part of the transaction process. (See: Duuo by Co-operators: A New Era of Embedded Insurance for Canadian Businesses)
- Wealth Management:Wealthfront and Betterment offer robo-advisory services that can be integrated into banking apps or financial management platforms, allowing users to access wealth management services and receive personalized investment advice based on their financial data.
The Impact on Financial Institutions
For traditional financial institutions, embedded finance represents both a challenge and an opportunity. Banks and credit unions must adapt to this new paradigm by becoming more agile, embracing API-driven architectures, and forging strategic partnerships with non-financial platforms. By doing so, they can tap into new customer segments and create alternative revenue streams.
The Role of Regulation and Technology
Regulatory frameworks like open banking have catalyzed the growth of embedded finance by mandating the sharing of financial data in a secure and standardized manner. Meanwhile, advancements in technology, particularly in API infrastructure, have lowered the barriers to entry, allowing even small players to offer sophisticated financial services.
Download the 13 page PDF report --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Tap-to-Pay Transactions and Big Tech Dominance Is A Thorn for CFPB
Regulation and Competition | Sep 11, 2023
Image: Unsplash/Rahul Chakraborty
The article titled "Report Highlights Role of Big Tech Firms in Mobile Payments" from the Consumer Financial Protection Bureau (CFPB) discusses the influence of Big Tech companies on mobile payments, particularly tap-to-pay functionalities on mobile devices.
The Problem: Tap-to-Pay and Big Tech
Tap-to-pay usage in the U.S. has seen substantial growth, nearing an estimated $300 billion across Apple Pay, Samsung Pay, and Google Pay. It's predicted that digital wallet tap-to-pay transactions will grow by over 150% by 2028.
Apple and google are dominant in U.S. mobile: As of the second quarter of 2023, Apple's iOS was on 55% of smartphones shipped in the U.S., while Google's Android was on 45%.
See: Policy Blind Spot: The Interdependencies of Big Tech and Their Foothold in Financial Services
Regulating access: Apple's iOS devices do not allow third-party payment apps to access NFC technology, making Apple Pay the only option for tap-to-pay on iOS devices. Google's Android, on the other hand, does not restrict third-party payment apps from accessing the NFC chip, but this could change.
Restrictions on tap-to-pay can limit consumer choice and hinder the move towards a more open banking ecosystem. For instance, Apple's NFC policy does not allow direct integration of tap-to-pay into existing banking apps and other payment apps like PayPal, Venmo, and Cash App.
CFPB Efforts
The spotlight is part of CFPB's broader initiative to monitor the transition to open banking in the U.S., including trends in consumer payments and the introduction of multi-service super apps.
See: ISED Launches Competition Act Review: Consultation on the Future of Competition Policy in Canada
The CFPB is working on a rulemaking required by Section 1033 of the Consumer Financial Protection Act to clarify consumers' personal financial data rights. This could speed up the shift towards open banking in the U.S., emphasizing interoperability across consumer financial products and services.
Striking A Balance and Competitive Landscape
The evolving landscape of mobile payments, driven by the policies and practices of tech giants like Apple and Google, underscores the intricate balance between innovation, consumer choice, and market dominance. As tap-to-pay transactions surge in popularity, the regulations set by these leading mobile operating systems play a pivotal role in shaping the future of retail payments.
Read: Canada’s Competition Problem: 7 Reasons
While these regulations can offer streamlined and secure payment solutions, they also raise concerns about reduced consumer choice and potential stifling of innovation. It's imperative for stakeholders, from policymakers to consumers, to stay informed and engaged in this rapidly changing domain to ensure a fair and competitive mobile payments ecosystem.
FAQ
1. How might the restrictions imposed by Apple on tap-to-pay functionality impact the competitive landscape of mobile payments?
Answer: Apple's restrictions on tap-to-pay functionality, particularly its decision to limit access to NFC technology to only Apple Pay on iOS devices, can create a competitive advantage for Apple Pay in the mobile payments market. Given that Apple's iOS holds a significant market share, this can lead to reduced choices for consumers who use iOS devices. Additionally, third-party payment apps and banks might find it challenging to compete on an even playing field, potentially stifling innovation and competition in the mobile payments sector.
See: Monopoly-Friendly Canada ‘Does Not Treat Competition Policy Seriously’
2. How does the growth of tap-to-pay transactions correlate with the increasing dominance of mobile operating systems like iOS and Android in the U.S.?
Answer: The dominant market shares of iOS and Android, combined with the rapid growth of tap-to-pay transactions, highlight the pivotal role these operating systems play in shaping the retail payments landscape. As more consumers adopt smartphones with these operating systems, the policies and practices set by Apple and Google directly influence how consumers make payments. The increasing shift towards mobile device payments underscores the importance of their policies, especially as they can either promote or hinder the adoption of tap-to-pay solutions, impacting consumer behavior and the overall growth trajectory of the mobile payments industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Autonomous IoT Transactions and Micropayments
Payments | Sep 1, 2023
Image: Unsplash/Dan LeFebvre
In the ever-evolving world of fintech, the fusion of the Internet of Things (IoT) and micropayments is poised to redefine the way we perceive and conduct transactions.
The Catalyst for Change
As devices become smarter and more interconnected, the need for seamless, real-time transactions becomes paramount. Enter micropayments, the unsung hero of the digital age, ready to facilitate these instantaneous exchanges. Let's embark on a journey to explore the future of autonomous transactions through the lens of IoT and micropayments.
See: Signals by Mastercard: Trends to Watch in the Future of Payments
IoT, at its core, represents a vast network of devices, from your refrigerator to your car, all communicating and sharing data. By 2025, it's estimated that there will be over 41 billion IoT devices worldwide. This digital symphony offers a plethora of opportunities, especially in the realm of transactions. Imagine a world where your car pays for its fuel, or your refrigerator restocks itself, all without human intervention.
Yes, yes. We've heard it all before since the concept of home automation first appeared in the mid-70s but given the explosion of technologies, interoperability and connected networks, growing number of use cases and adoption, but the opportunity seems different in 2023.
Traditional payment systems, with their cumbersome processes and fees, are ill-suited for the rapid, low-value transactions that IoT promises. Micropayments, with their ability to handle small amounts efficiently, emerge as the perfect solution. They promise minimal transaction fees, instant processing, and a level of flexibility that's music to the ears of the IoT ecosystem.
Real-world Convergence
- Smart Grids: As cities become smarter, utilities will leverage IoT to monitor real-time consumption. Micropayments can facilitate instantaneous billing, allowing consumers to pay for their exact usage, fostering transparency and efficiency.
Report: A Big Future for Small Payments - European Central Bank
- Connected Mobility: The future car is not just autonomous in navigation but in transactions too. Envision a scenario where vehicles communicate with toll booths, parking spaces, or charging stations, making micropayments on-the-go.
- Intelligent Homes: Beyond the realm of sci-fi, smart homes will soon autonomously manage their supplies. Your coffee machine could order beans when running low, and your thermostat might purchase energy off the grid during off-peak hours, all facilitated by micropayments.
- Healthcare Revolution: Wearable devices could soon be making healthcare decisions for you. From ordering medications when they detect an anomaly to booking a doctor's appointment based on real-time health data, the potential is immense.
Challenges
While the convergence of IoT and micropayments paints a rosy picture, it's not without challenges. Security remains a paramount concern. With billions of devices transacting autonomously, the threat landscape expands. Scalability is another hurdle. As the number of IoT devices burgeons, can our current micropayment infrastructure keep up?
See: Lyn Alden Analysis: A Look at the Lightening Network
Moreover, there's the challenge of standardization. For a truly seamless experience, devices from different manufacturers need to "speak the same language." This calls for industry-wide collaboration and perhaps the creation of universal standards.
In Conclusion
The fusion of IoT and micropayments is more than just a trend; it's the future of transactions. As we stand on the cusp of this revolution, it's essential to embrace innovation while being cognizant of the challenges. In the words of futurist R. Buckminster Fuller:
We are called to be architects of the future, not its victims." The fusion of IoT and micropayments is our chance to architect a future where transactions are not just seamless but also autonomous, efficient, and intelligent.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Duuo by Co-operators: A New Era of Embedded Insurance for Canadian Businesses
Press Release | July 20, 2023
Image: Freepik/Storyset
In a significant move for the insurance industry, Duuo by Co-operators has launched its first embedded insurance API for partners, designed to enhance the customer experience by integrating the insurance purchase journey directly into their website, app, or platform. The first product to be launched in this new format is Duuo Event Insurance, offering event hosts a seamless experience of booking a venue and securing event coverage.
See: Here is why InsurTech is heating up as an investment category
The implications of this launch are far-reaching. By embedding insurance directly into platforms, Duuo by Co-operators is simplifying the insurance process, making it more accessible and convenient for customers. This could potentially revolutionize the way insurance is purchased and consumed, setting a new standard for the industry.
Following the event insurance, Duuo by Co-operators plans to launch their tenant insurance API, further expanding their embedded insurance offerings. This move signifies the company's commitment to innovation and customer-centric solutions, positioning them as a leader in the insurance industry.
Steve Phillips, Executive Vice-President of Emerging Business Models at Co-operators:
"This new journey we’re embarking on rapidly expands our ability to allow our partners to grow and differentiate themselves in their own market, on their own terms."
This statement highlights the company's commitment to providing flexible, adaptable solutions that benefit both their partners and customers.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Future of Neobanking: Exploring the Landscape of AI-Powered Digital Banks
Digital Banking | Jul 16, 2023
What is an AI-driven Neobank?
An AI-powered Neobank is a licensed digital-only bank that leverages artificial intelligence to deliver customer-centric, operationally efficient, and profitable services at scale. These banks differentiate themselves by embedding data and AI capabilities extensively across all aspects of their operations. This allows them to deepen customer relationships, improve financial performance, and deliver hyper-personalized services. They operate with lower cost structures and disruptive pricing practices compared to traditional banks.
See: How AI Has Revolutionized The Canadian Banking Industry
- A couple of examples of AI-powered Neobanks that are transforming customer experiences include:
- Revolut has rapidly launched and reworked new products and propositions, adapting to evolving customer needs. It has launched an average of a new product every quarter, driven by its strategy of experimenting with new products to address evolving market trends.
- Klarna uses a machine learning-based recommendation system to determine consumer purchase patterns and offer appropriate shopping recommendations and financing offers.
- In Canada, we can expect digital banks and fintech companies to make waves by further integrating AI across the spectrum of business operations:
- Neo Financial: This Canada-based digital bank recently raised $185 million CAD in a funding round, signaling confidence in the neobank sector. While it's not explicitly stated that they use AI, their digital-first approach and innovative services suggest they likely leverage AI technologies.
- Wealthsimple: Although primarily known as a robo-advisor and investment platform, Wealthsimple has expanded its services to include savings accounts and peer-to-peer money transfers, tax preparation software, and more. The company uses AI to manage investment portfolios, and it's possible that they use similar technologies in their other financial services.
Please note that while these companies are innovating in the financial sector, the specific use of AI in their banking services isn't explicitly confirmed in the search results. For detailed information, it would be best to visit the companies' websites or contact them directly.
Key Characteristics and Capabilities of Neobanks
AI-powered Neobanks can have several advantages over traditional banks. They operate with lower cost structures and offer more transparent pricing terms with fewer hidden fees. They leverage AI to deliver hyper-personalized services, maximize customer lifetime value, dramatically lower the cost to serve through automation, and adopt superior data-driven risk management practices.
See: French Neobank Startup, Green-Got, Collaborates with 1300 Crowdfunded Climate-Conscious Investors
They also have the ability to launch products at high velocity, focus on customer engagement, hyper-personalize experiences, adopt conversational design, integrate open-banking features seamlessly, leverage partner ecosystems to scale, and use customer-lifetime-value (LTV) to guide actions.
- AI is the cornerstone of successful neobanks, enabling them to deepen customer relationships, improve financial performance, and deliver hyper-personalized services. By embedding AI capabilities across operations, neobanks can maximize customer lifetime value, lower costs through automation, and adopt superior data-driven risk management practices.
- Winning neobanks distinguish themselves by rapidly launching and reworking new products and propositions, adapting to evolving customer needs. They prioritize customer engagement, offering services that go beyond pure-play financial services to deliver new forms of utility and entertainment.
- Successful neobanks leverage machine learning to personalize customer experiences, matching customers' present context and historical behavior. They are also adopting conversational design, replacing traditional forms and questionnaires with chatbots, voice assistants, and live video consultations for superior engagement.
- Neobanks gain a competitive edge by building an open platform from the outset, seamlessly tapping into the broader open-banking ecosystem. They also leverage partner ecosystems to scale, embedding their services within these ecosystems for easy, low-friction access to banking services. Open banking, facilitated by APIs, allows neobanks to integrate with other financial services and third-party providers, creating a seamless and holistic financial ecosystem for customers. This can include everything from linking with fintech apps for budgeting and investing, to integrating with payment services for easy money transfers. As customers demand more interconnected services, the ability to integrate effectively will be a key factor for success.
- Successful neobanks use customer lifetime value (LTV) as a key performance metric, alongside traditional balance sheet metrics. This enables them to take more granular and tailored actions quickly, boosting customer value and driving strategic and operational decisions.
Challenges and Opportunities Ahead
Like all fintechs, Neobanks, or digital-only banks, have been disrupting the traditional banking industry with their innovative, customer-centric approach. However, they face several obstacles and opportunities that will shape their future in the financial services industry.
Security and Regulation
As digital platforms, neobanks are attractive targets for cybercriminals. Ensuring robust security measures to protect customer data and transactions is crucial. They need to invest in advanced security technologies and protocols to prevent data breaches and fraud, which can be a significant challenge given the evolving nature of cyber threats. Neobanks often face complex and varying regulatory environments across different regions. Compliance with these regulations, including those related to data security and privacy, can be costly and time-consuming.
Profitability, Trust, and Adoption
Many neobanks are still striving to achieve profitability. They often offer free or low-cost services to attract customers, which can make revenue generation challenging. Despite their innovative offerings, they still need to earn the trust of potential customers, especially those who are accustomed to traditional banking. This trust extends to the security of their platform and the protection of customer data.
See: When A Neobank Goes Bankrupt What Happens to the Customers?
As more people become comfortable with digital banking, the adoption of neobanks is expected to increase. This is particularly true among younger generations who are digital natives and prefer online services. Many neobanks are looking to expand their services globally. This includes entering emerging markets where a large portion of the population is unbanked or underbanked.
Financial Inclusion and Sustainable Banking
As digital-only banks, neobanks already have a lower carbon footprint than traditional banks. They can further this by investing in environmentally friendly practices such as renewable energy for their data centers, promoting paperless banking, and offering products that support environmentally friendly practices, such as green loans or investments in sustainable businesses. Socially Responsible Products that support social welfare, such as microloans or greenloans for low-income individuals or businesses, or investment options that prioritize companies with strong social responsibility records. Operators must commit to ethical practices such as fair pricing, transparency in their terms and conditions, and avoiding investments in industries that are harmful to society or the environment.
Future of Neobanking
In conclusion, the future of neobanking is bright, promising a revolution in the financial services industry. As they overcome obstacles such as regulatory challenges, security concerns, and the quest for profitability, neobanks are poised to redefine banking with their customer-centric, digital-first approach. Innovations in AI, machine learning, open banking, and blockchain are set to drive this transformation, offering personalized, integrated, and efficient financial services.
Furthermore, by prioritizing financial inclusion and ethical, sustainable banking practices, neobanks have the potential to not only disrupt the banking industry but also contribute to a more inclusive and sustainable financial ecosystem. As we look ahead, it's clear that neobanks will play a pivotal role in shaping the future of banking.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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APIs and the Evolution of Digital Platforms: Towards a Three-Sided Market
Citi | Jun 16, 2023
Image: Citi
Embracing the three-sided market model, where financial institutions integrate with digital platforms alongside buyers and sellers, can unlock new network effects, accelerate economic growth, and enhance customer engagement in the digital economy.
- The report introduces the concept of a "three-sided market" where financial institutions are integrated into digital platforms alongside buyers and sellers. This model enhances the platform's value proposition by providing financial services such as payments, foreign exchange, and credit within the platform itself.
- Integration of Financial Services into Platforms:
- The report discusses various ways platforms have integrated financial services, including partnering with established financial institutions, creating regulated subsidiaries, or leaving the provision of financial services to external third parties.
- The report identifies Open Banking, Embedded Finance, and Decentralized Finance (DeFi) as potential catalysts for the emergence of three-sided marketplaces.
- Opportunities for Fintechs:
- They could also collaborate with platforms to create unique value propositions, such as exclusive discounts or rewards, to drive customer engagement and loyalty.
- They could also develop solutions that help platforms integrate financial services more efficiently and could play a key role in facilitating the transition.
See: FIS Dives Deeper into Embedded Finance with Bond Acquisition
- Opportunities for Banks:
- Banks could see this as an opportunity to maintain customer engagement and expand their services in the digital economy. By becoming integral components of these platforms, banks could tap into new customer bases and participate more actively in the digital economy.
- Banks could explore partnerships with platforms or consider developing their own platforms. They could also consider how to leverage their existing customer relationships and trust to provide services within these platforms.
- Implication for Regulators:
- Regulators need to consider the implications of this new business model, particularly in terms of ensuring fair competition, data privacy, and security. They may need to update regulations to accommodate these new business dynamics and ensure consumer protection.
View more --> here
Download the 20 page PDF report --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Marqeta 2023 State of Payments Report: Rise of P2P Payment and Embedded Financial Services, & Hybrid Future?
Tearsheet | Sara Khairi | Jul 5, 2023
Image: Marqueta - 2023 State of Payments Report
The future of banking is expected to be a hybrid model, combining traditional and embedded financial services (Marqeta: 2023 state of payments report)
- Traditional vs Digital Banks -- Hybrid future?
- Despite the rise of digital banking, traditional banks continue to play a significant role. Consumers are seeking the best of both worlds, with 37% wanting to maintain relationships with their traditional banks while also enjoying the benefits of tech-enabled services from digital banks.
- 81% of consumers using a traditional bank for their primary account and 64% storing the majority of their funds in a traditional bank.
- However, 37% of consumers also use a digital-only bank, primarily due to satisfaction with their mobile apps.
- Traditional payment methods, such as cash and debit cards, still surpass newer digital payment methods, but the gap is narrowing.
See: Payments Canada Report: Rebound & Grow – Payment Methods and Trends in 2021
- Rise of Embedded Financial Services:
- Embedded financial services, such as integrated payments and Buy Now, Pay Later (BNPL) options, are gaining popularity due to their convenience. These services are expanding beyond payments and lending to include insurance and investments.
- Integrated payments, in particular, are leading the way, with 76% of consumers preferring to make purchases through a retailer's mobile app, up from 69% in 2022.
- P2P Apps Gaining Traction - expected to reach $4.89 trillion by 2030
- Younger Americans are driving this growth, with 75% of consumers having used a P2P payment app in the last 12 months.
- PayPal is the most popular service, with 88% of consumers reporting usage in the past twelve months.
Read: Payments Canada Delays Launch of Real-Time Rails Again (without a timeline)
- Shift in Card Business:
- The increased adoption of digital wallets is creating competition among card issuers. Consumers tend to keep only a few cards in their digital wallets for ease of use and convenience. Card providers can stay ahead by offering a hassle-free experience, flexible payment terms, and relevant rewards and incentives.
View more --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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