As we head into the fourth quarter, probably the most innovative year in payouts since the pandemic, capital release emerges as the story of the year.
The movement of money becomes intuitive and frictionless, part of what happens in the background of all kinds of commerce.
Ingo Payments Chief Innovation Officer Joseph Akintolayo told PYMNTS in “What’s next in payments” interview that focuses on the “embed everything” theme that “putting money in the palm of your hand” — literally, with mobile devices or other technologies — can be a boon for consumers. It also opens up new opportunities for businesses and anyone in the financial services value chain.
The driving force behind embedded finance is that from the consumer’s point of view, “the person they’re serving — that person wants whatever transaction they’re trying to do to happen as smoothly as possible with as few steps as possible,” he said.
The seamless interaction between consumers and businesses is all possible thanks to payments being “compiled” by various companies and infrastructure players, he said. Banks and payment companies need to pivot to support their customers and meet those customers’ expectations, especially against the competition FinTechs.
An expanded competitive landscape is healthy for consumers and encourages more opportunities for transaction volume and more “wealth creation” for all stakeholders, he said.
When asked by PYMNTS where the fruit lies for embedded finance, Akintolayo said there is potential for fund flows to be embedded in verticals such as travel, transport, logistics and gig workbetween several other verticals.
Tradespeople (such as plumbers) can more easily be paid on the spot and on completion, bypassing paper invoices and the weeks or even months it can take to pay or offer financing for larger projects.
With the rise open bankingaggregators can get the consumer’s (permissible) financial information to another company that can make a credit decision in a split second. That decision can then be handed over to another entity that provides debt financing. Ingo can instantly transfer money to a card, bank account or digital wallet, skipping checks.
Financial wellness gets a boost
Beyond the boundaries of the transaction itself, embedded financing has the potential to improve financial health and inclusion, Akintolayo said. Churches, non-profit organizations and other non-traditional businesses have a strong relationship with the end consumer.
“And they have great trust with the end consumer,” he said. “That’s enough to get them on board and bring them into the fold,” especially with a population that doesn’t have enough funds for banking and services.
Banks themselves can partner with these trusted sources to provide financial services and a variety of product offerings to these individuals and families that increase access to capital. Advanced technologies such as artificial intelligence and machine learning can use alternative data to assess risk and insure populations that may have had limited access to credit in the past, he said.
Ingo, for his part, has done a lot of work connecting different ecosystems supporting compliance, risk management, payments and accounting, things that make everything work, Akintolayo said.
“We have an advanced cloud-based ledger that allows everyone to see what’s going on” with a transaction, he said. “Parties have full visibility. The sponsoring banks, which provide infrastructure and regulatory umbrella for us to do that, they have all the information they need in real time when they need it” as money winds its way between end customers and banks.
Finally, with the rise of embedded finance, customer loyalty will improve.
“No one will be mad at you for making their lives easier,” said Akintolayo, who added that “we are in a society that values convenience, and embedded finance provides that.”
