In the ever-changing world of financial services, the concept of corporate embedded finance is taking centre stage as we swiftly approach 2024. This dynamic concept is poised to undergo steady and significant transformations over the next few years. Let’s delve into what we, at Toqio, think will emerge in the embedded finance space throughout the coming year. Here's our list of upcoming trends and predictions.
1. The continued growth of embedded finance
Since embedded finance refers to the digital process of integrating financial services into non-financial products and services, and everything digital seems to move at breakneck speed, it will ramp up in 2024. Corporate embedded finance platforms like Toqio will play a key role in this growth, as they enable businesses to embed financial services into their own offerings, quickly and easily. All the reports published on the topic in 2023 have said the same thing: the success of embedded finance in the consumer space will carry over into the B2B arena, and be worth trillions.
2.The extended adoption of emerging technologies
Several emerging technologies, including artificial intelligence (AI) and machine learning (ML), will slowly make their way into the embedded finance space throughout 2024. We can expect to see increased adoption of these technologies by corporate embedded finance platforms and other fintech companies. Tentative steps have already been made, but the serious consequences of issues arising from implementing these sorts of technologies have made those integrating them trepidatious, to say the least. Both AI and ML are yet to be seen in corporate embedded finance. That’s mainly because integration, especially with regard to lending, will be all about data collection and how to analyze the information extracted. Those two technologies, when linked to data science, will therefore be key differentiators in the future.
3. Growth in financial inclusion and corporate financial offerings
Financial inclusion has the primary goal of making financial services accessible and affordable to everyone. In the upcoming year we can expect to see corporate embedded finance platforms focus more on the topic. This will involve developing new products and services that are specifically designed to reach the people who need it most.
More specific to the business sphere, "affordability" will become a heavy focus for brands to increase customer loyalty in both the B2B and B2C spaces. Brands will seek to offer customers and partners more financial product options when banks will not or cannot engage, such as turning down a loan based on traditional scoring methodologies or opening up lines of credit in light of restricted cash flow.
Though Toqio focuses on the B2B space, by working with underserved SMEs we can ensure our financial inclusion goals are met, as SMEs tend to work closely with individuals in niches. A good example is our client Movepay. They offer core banking solutions to immigrants moving to the UK to make the entire relocation process easier with regard to finances. Our CCO Mike Galvin said it pretty well:
Financial inclusion is actually one of Toqio’s primary concerns. In our public materials, we clearly state that we want to decentralize finance by giving companies the ability to define their own finance products using our world-class platform.
Toqio and other companies with similar beliefs are working toward making finance as easy to understand and use as possible for everyone.
4. Increased regulation of the fintech industry
As the fintech industry continues to grow, regulators are taking a closer look at it. This has led to increased regulation of the industry in recent years, and this trend is expected to continue. A lot of this has to do with the missteps of several financial service providers over the last couple of years. Embedded finance platforms will need to comply with these new regulations in order to ensure that nobody can take advantage of the great tools that are being produced.
5. The terraforming of the financial landscape
Incumbent banks have demonstrated their staying power and adaptability time and time again, mostly due to being able to leverage their size and relative dependability. Banks are finally recognizing the need to adapt to changing customer expectations and digital transformation, especially as embedded finance matures and larger corporations embrace the concept.
In a very real sense, large companies are becoming the new disruptors. Banks have actually started scaling back their innovation because of market speculation and the spectre of possible collapse. Competition will become even more significant as the nature of a disruptor changes from a fintech to an empowered corporate entity.
The future of core banking is likely to strike a balance between fintech-driven companies and incumbents. While large financial institutions will endure, their role is evolving. Their strengths are assessment, management, and specialized services. We’re already seeing them pivot toward analyzing data from a multitude of sources, diving into data lakes to provide genuinely useful risk assessments. As our CEO Eduardo Martínez commented the other day:
“Incumbents are trusted to manage most of the money in the world. They excel at providing large operations excellent service. By cooperating with fintech disruptors, they can create new channels to market and a new way to do what they do best: risk management and fund deployment.”
Throughout 2024, then, we’re going to see a conscious and guided re-creation of the finance sector, a full terraforming of the terrain with the intention of creating something that flourishes, with incumbents, fintechs, and companies all seeking to find their niches in the ecosystem. It’s clear that corporate embedded finance will be a massive part of the upcoming shift.
Conclusion: corporate embedded finance will be a game changer
The entire concept of companies offering financial products and services to partner companies within a secure and beneficial ecosystem will drive massive market changes, and we’re not saying that just because we have a horse in the race. Corporate embedded finance will get fairly close to becoming an industry norm. As per Michael Pierce, our VP of Sales:
“I think 2024 will be the year of corporate embedded finance technology. It’s the year we’ll see new tech and regulations change what we know about how the sector operates. It’s the year corporates will truly become banks, or at least bank-like. It’s the year smaller companies will look to trusted, larger partners for financial guidance and support. It’s the year that will end with corporations having recession-proofed their revenue streams through diversification. It’s the year where we’ll see corporates capturing new revenue by offering financial solutions throughout their operations.”
Toqio is well-positioned to capitalize on the growth of the embedded finance paradigm and the steadily increasing adoption of emerging technologies. Overall, corporate embedded finance will have a massive impact on the finance sector in general over the next year and beyond.
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