New White Paper! Embedded Finance for Credit Unions and Regional Banks: A Building-Block Approach – in partnership with American Banker

By · March 06, 2024
6 minute read

Navigating Embedded Finance: Profitable Strategies for Credit Unions and Regional Banks 

point of sale

 The way people buy financial products is changing.  Consumers increasingly demand instant access to products or services, especially financial products. Shopping around and comparing financial products through traditional channels is simply no longer the norm. 

 Embedded finance presents an enormous opportunity for both regional banks and credit unions. Publicis Sapient estimates that revenue from embedded finance will reach $160 billion by 2025. Embedded finance gives instant access to the financial products consumers want. Bundled, value-added offers provide financial and non-financial products for consumers and customers that fit their unique needs and lifestyles. 

In our recent webinar with The Financial Brand, we discussed embedded finance’s new opportunities and how banks and credit unions can take advantage of them. Keep reading for more insights, or watch the full webinar on demand! 

New Business Models, New Opportunities 

Embedded finance and value-added offers give consumers a more personalized, tailored product. Consumers aren’t just looking for a financial product like a mortgage or personal loan—they expect more life-centric offers. Thinking outside of these narrow definitions and expanding into bundled offers puts banks and credit unions in a better position to serve their customers and members.  

Both new players and established incumbent banks have already implemented this. In 2023, Experian unveiled a new digital checking account designed to help customers improve their credit scores. The account identifies payments that would boost scores and adds them to the customer’s Experian report. These kinds of value-added services serve a specific customer segment but also represent a unique opportunity to break into new lines of business via partnerships. 

Regional Banks and Credit Unions Have the Advantage 

Regarding trust, banks and credit unions have a distinct advantage over their competitors and new challengers. Consumers still appreciate having access to live representatives of banking branches when needed, and community-driven approaches still resonate with customers or members. Pursuing new business models helps banks and credit unions meet customer/member needs and expectations while leveraging established relationships and trust. 

Embedded Finance: Convenient and Seamless 

Embedded finance makes traditional finance products available to customers or members through non-traditional distribution channels. Split payment solutions, BNPL, auto loans from dealerships, and personal loans from medical providers are just a few examples of embedded finance.  

Making these financial products available through non-traditional channels offers customers and members the convenience they need and expect. And banks and credit unions can use embedded finance to access new customer segments and increase sales volume at a lower acquisition cost. A consumer may not be a bank customer or credit union member if they, for example, need a loan at a medical provider’s office. But offering an embedded product through a partnered doctor’s office gives banks and credit unions access to that entirely new segment of customers looking for a convenient financial product. 

Value-Added Offers: Life-Centric and Tailored 

Value-added offers bundle financial and non-financial products, selling them through traditional channels. As a product strategy, value-added offers are life-centric and differentiate banks and credit unions. Instead of offering just a mortgage to first-time homeowners, a bank could bundle it with a life insurance policy and home insurance.  

This tailored approach can attract new customer segments and generate more non-interest revenue for banks and credit unions while adding value. These offers are relevant to what customers and members need, offering a “one-stop shopping” experience. Banks and credit unions can tap into this unique opportunity using fintech, embedding these value-added offers into product sets, mobile apps, or processes. 

Putting Change Into Practice: Vibrant Credit Union and Tower Community Bank 

Embedded finance and value-added offers present enormous opportunities for regional banks and credit unions. Both Vibrant Credit Union, a credit union in the Midwest, and Tower Community Bank, a 53-year-old bank in Nashville, Tennessee, took advantage of these opportunities 

Vibrant Credit Union set out to digitalize and automate its automated lending for retail showrooms. After partnering with FintechOS and an equipment manufacturer, the Credit Union went to market within six months and generated over $500,000 in new loans in just two weeks and over $40 million in one year.  

Tower Community Bank sought a point-of-sale digital lending solution to test new markets and accelerate customer journeys. With the help of FintechOS and the partnership of local medical providers, Tower Community Bank was able to offer patients quick and seamless financing solutions in-office. This untraditional point-of-sale solution has allowed the Bank to grow its loans and deposits, with plans to extend this innovative financing solution to other markets. 

Bringing It All Together With Fintech

Embedded finance is poised to offer regional banks and credit unions new sources of revenue, customer segments, and modernization opportunities. By augmenting and centralizing existing systems that were previously siloed, banks and credit unions can hone in on a life-centric approach to product management. This life-centric approach meets customers and members at crucial moments and milestones in their lives, from purchasing a first home or vehicle to major home improvement projects and college matriculation. 

This life-centric economy and strategy requires a centralized portfolio of products and some agility. But fintech and fintech enablement platforms allow teams to change, update, or add products without an outside vendor or contractor. Personalization is a must-have for journeys and financial products, but putting that into practice requires data. With automation and a robust integration framework, Fintech can help fill in the gaps from siloed, disparate systems.  

With fintech enabling personalization and bundling, regional banks and credit unions can fully take advantage of embedded finance’s revenue opportunities. Bringing together financial and non-financial products in value-added bundled offers meets customers or members during important moments of life, better serving them and their families. Embedded finance represents a modernized way of distributing financial products, reflecting the ever-evolving market and customer. By tapping into these new customer segments and opportunities, regional banks and credit unions can be resilient even during change. 

Want to watch the entire webinar? You can watch the full session plus Q&A! 

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