Sponsored content: OpenPayd – Why every company needs an embedded finance strategy now

Hello and welcome to business reporters future financial services and banking campaign i’m ashley blake as the digital economy continues to grow at an incredible rate accelerated even more by the global pandemic businesses of all sizes are recognizing the importance of digital delivery channels for future proofing themselves with so much commerce now taking place

Online there’s a huge opportunity to change the way that we consume financial services now historically you would only expect to be sold financial service products via a bank now you can get a loan from your garden center a bank account from your investment platform or create a virtual card instantly in your phone a key challenge to the growth of embedded finance

Is that to successfully build out these use cases it requires a combination of api first banking and payments technology and a strong license infrastructure backed by an expert compliance knowledge so what opportunities does embedded finance offer to digital businesses what part do large banks have to play within embedded finance that’s what we’re about to find

Out from dr ozin ozark founder of openpaid ozone perhaps you can start by you giving us an overview of what embedded finance is and who are the key players well embedded finance is basically where you take financial services and you integrate it into a product and our service which the consumer then so as an example if you’re a marketplace or an airline at

Some point in your journey you are collecting funds you’re taking payment from your consumer and that part of the journey is quite friction full today basically there are a lot of events taking place in order for that transaction to take place so when you embed that product and service into your offering you reduce the friction and you increase the success rate

Of your transaction so who are the winners is it the consumer or the merchant in this case both parties are the winners because the consumer get a better offering at a cheaper price with spending less time and with less headache the friction get very much reduced the merchant on their end are able to secure that the transaction take place basically are able to

Secure that they are doing their sale and at the same time they can upsell or provide other type of services which are related to their overall offering so you talk about friction there that suffered from presumably the the consumer just give us an example of a journey the where it could go wrong where the consumer gets to the payment part but for some reason

Decides to go elsewhere well i think we all recognize the event where you are trying to buy an airline ticket and you have filled in you have chosen where you’re going your passport details your name you maybe created an account you spent all these verification exercises to prove that you are you and you really want to fly to the destination you’re going and at

The very end they ask you for your car details and you obviously fill in your car details and are quite sure you’re right but you don’t have the right connectivity so your mobile phone doesn’t receive the sms to confirm the transaction transaction fails or everything goes well you receive your confirmation sms you fill in the right data but for some reason that

Transaction doesn’t take place okay so now you have to start all over again that’s a very bad consumer experience and that’s a very bad experience for the merchant as well because both party have kind of shook hands that you want the service i will provide it now there’s a middle layer that needs to work for that to take take place when that failed the consumer

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Got upset with the airline because they’re clearly doing something wrong and the airline are losing out on business so this is what typical example that we all recognize that we are in a web shop we try to consume something we have to pay for it we want to pay for it we feel we have done everything right as a consumer and the transaction still fails or you can have

A typical black cap thing like you’re on your way home from a late night and you come to your place and suddenly their pos terminal doesn’t work or there’s some other friction that you didn’t expect when you consume that service and you have to bring your wallet go for cash these are all type of events that creates a bad consumer experience that embedded finance

Can uh can improve on and does that matter to the merchant the journey that the consumer has taken because at the end of the day all they want is is a sale obviously because first of all there is very fierce competition between various providers of online services so the last thing you want to happen is that a consumer that you are able to attract your website

That you are able to push through the whole sales journey come to the very end and they’re not able to consume the product that you’re trying to provide them or maybe even worse is that you’re able to provide them one part of the service but you’re not able to upsell your service because what happens is that the consumer will buy something from you and then go

Into someone else and buy more from them if you could provide all of those services to begin with you would create a much bigger loyalty with your consumers so this is very important for the merchants a seamless journey for the consumer and the merchant benefits yeah seamless journey for the merchant seamless journey for the consumer as well and the ability to

Consume more services through that journey i understand so how does open pay help with this we are a provider of embedded financial services so what we do we help an airline or insurance company or a normal marketplace by providing a technology which makes the payment part much less frictional than today so you have the technology and on top of that we give

Them a license foundation because we have a lot of different licenses that you need to have to provide these type of services so not only are we able to help the merchant take payments but we’re also able to provide merchant new type of services they can provide to their consumers let me give you an example we can help you get a credit line so you can actually

Give a credit to your consumer or we can help you open up a bank account for your consumer or we can help you with better effects exchange rates so all of these type of added services creates a better customer journey and a stickiness with the consumer which is very important so what are the the problems that digital businesses are facing with embedded finance

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There are several challenges in the embedded financial space today that make it very difficult for merchants to kind of integrate and operate the way they theoretically should be able to do first of all it’s a regulated business so you need to have licenses so whoever provide you the service needs to make sure that behind them or as a part of their offering

There is a regulated entity that protects the merchant and the consumer that’s number one second of all you need to have a technology that can keep up with the service you are providing so if you are providing a service that needs payments to happen very very fast but the platform you’re integrated to are working very very slow there will be friction between the

Two platforms that will result in a bad consumer experience and the third one you need to have a provider which understand the need of your business today and also where your business is going because by the time you integrate you promote this to your consumers market is moving on because a very competitive environment so if i was a merchant today and i looked

Out in the financial space and we’re looking for a provider of embedded financial services it’s very hard to find a provider that can cater for all three basically having the regulated entities the technology and also the know-how of where the market is going i see um you touched upon regulation there and licensing tell us about the journey that open paid went

Through to become licensed so obviously this is a very regulated space we are you’re dealing with money and financial services and you are dealing with multiple countries multiple regions and you have to deal with multiple regulators and different regulations as well so what we at open paid i’ve always focused on is either to obtain our own licenses or partner

With solid other companies that have the regulatory part in place so we can build our service on top because just having great technology and a lot of know-how bring doesn’t bring you all the way through your clients your consumer your partners any third party you work with expect you to have the regulatory foundation in place so this is very critical so i’m a

Business i’ve been with my bank since the start of my business who have supported me i have a certain amount of loyalty with them why can’t i just use them most existing payment providers and especially banks do not have the complete product offering that a modern digital business today would like to consume because businesses today let’s say you’re a marketplace

Like to give out credit they like to provide exchange services they like to give out bank accounts they like to add added services to the consumer in order to do more sales so if i was working with only one traditional bank or an existing payment provider they might be very good at that specific service they’re already providing but the minute you take a step out

And you want to add another service your traditional bank might not be able to help you out so combining an embedded financial service provider like open paid with your existing banking relationship or payment provider is a very smart move for most digital businesses so is it a collaboration between open paid and the banks or are you competing any provider of

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Embedded financial services like open paid are taking a step into the turf of the existing payment provider very often the bank but this is not about competing with the banks because open paid and other companies like us we need the banks in the back anyway what we are adding we are adding more services being able to consume in a better way with the banks as

A partner so it’s not about embedded financial service providers versus the bank it’s more about what does the consumer wants what what does the merchant want to provide to the consumers and how can somebody like us provide a frictionless event where the consumer can consume a variety of services most of them in financial services but also non-financial services

That comes with it so where do you see the the collaboration and the relationship between banks and fintechs say within the next five years first of all most people trust their banks so the banks have the benefit of having a huge audience existing client relationship most people get their salary into a bank there’s a reason for that because they trust the banks

They have a relationship maybe they have a car mortgage a house mortgage or a car loan they have some kind of relationship a stickiness with their existing provider so i i tend to see the banks as on one hand one of the key players in the space because they have the audience they have the user base but they might not have all that various services that consumer

Needs we can go in and we can supplement we can fill in those gaps that the banks have and on top of that we see the banks as a partner in the back so at the end of the day when i take a payment and i do something with that fund settle it exchange it send it i have to touch the banking rails so one way or another you will be working with at least a few banks in

The background so i see the banks both on the consumer facing side as a huge database of clients that we can help provide better services to but also on the back end that at the end of the day we need the banks to be able to send and receive money so you’ll be a welcomed new player to the field absolutely um i think a lot of existing banks big banks that have a

Certain business model are having challenges with the changing and regulatory environment and also how new technology are providing competing services so if i was a large tier one bank i would be concerned about how you can get a big organization like a bank to keep up with the very fast changing trend in payments and financial services that being said the banks

Have a huge advantage in other fields and if they use that advantage as their brand recognition the huge customer database their existing stickiness and knowledge about their clients and combine that with added services from a company like open paid their offering will be much better and our life as a payment provider or embedded financial service provider would

Be much easier as well so there is room for collaboration here excellent ozone thanks very much for coming in and explaining that to us thanks for having us you

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Sponsored content: OpenPayd – Why every company needs an embedded finance strategy now By Business Reporter