The technology behind embedded finance

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The fintech universe is abuzz with the term “embedded finance”, which refers to the integration of financial products and services into non-financial platforms, applications, or ecosystems. It involves leveraging technology to embed financial functions directly into existing platforms or applications, such as e-commerce websites, mobile apps, or even devices that are a part of the Internet of Things (IoT). It practically eliminates the need for users to rely on standalone financial apps or traditional financial institutions.

How embedded finance is used

Embedded finance can take various forms, including embedded payments, embedded lending, embedded insurance, and embedded savings, among others. Emerging B2B applications range from auction or lending functions installed in a factoring or reverse factoring environment, immediate payment transfers to suppliers or distributors, direct lending to ecosystem participants, and many others.

Embedded finance has gained significant traction in recent years due to the increasing digitalization of industry, the rise of modular and composable architectures that allow different systems to connect and interact, the decentralization of financial services, and the growing demand for simple, efficient, and convenient financial experiences. Embedded finance has the potential to democratize access to financial services, simplify financial transactions, and create new business opportunities by integrating financial services directly into the daily activities of consumers and businesses. As embedded finance continues to evolve, it will likely have a significant impact on the financial service landscape, transforming how financial products and services are delivered, utilized, and regulated.

Embedded finance technology

Embedding finance into a digital offering typically requires a specialized technology stack. The specific stack may vary depending on the type of embedded finance service being offered, the scale of operations, and the regulatory requirements in effect. There are some common components, however, so we’ll run through them and briefly mention how the Toqio platform incorporates or addresses each one. Special thanks to our Head of Tech Research and Innovation, Daniella Rhodes, for laying out our tech stack and taking us through everything, piece by piece.

Back-end infrastructure

A robust and scalable backend infrastructure is necessary to handle the processing, storage, and management of financial data securely. This may involve databases, servers, cloud computing resources, and other infrastructure components that can handle high volumes of transactions and ensure data privacy. We use Amazon Web Services (AWS) for most of our backend, though we don’t store user financial account data. We leave that to our banking partners.

Payment gateway

A payment gateway is a crucial component for embedded payments, enabling the secure and efficient processing of online transactions. It facilitates payment authorization, processing, and settlement, and may involve integration with payment processors, card networks, and other financial institutions. This can be provided by an incumbent bank or a licensed BaaS provider. Toqio has several pre-existing relationships with BaaS providers that customers can engage or disengage at the flick of a switch on the platform. We’re currently in the midst of multi-banking support so that customers can switch financial service providers if necessary or use features from several providers simultaneously rather than be tethered to only one for multiple services.

APIs and SDKs

Application programming interfaces (APIs) and software development kits (SDKs) are essential for integrating external financial services into an app or website. APIs allow different systems to communicate and share data securely while SDKs provide libraries, tools, and documentation to enable developers to build custom functionality into their apps. We offer both, with secure public APIs for service integration and a full complement of development tools customers can use out of the box, including graphic and code libraries, extensive documentation, monitoring and analysis tools, etc.

Identity, authentication, & risk management

Strong identity and authentication mechanisms are critical for ensuring the security and integrity of financial transactions. Risk assessment and fraud detection tools are an absolute must in embedded finance. This normally involves integrating technologies such as multi-factor authentication, biometrics, or tokenization to authenticate users and protect against fraud. As part of our onboarding module, Toqio has already designed tools for companies seeking solutions related to “know your customer” (KYC), “know your business” (KYB), and anti-money-laundering (AML).

Security

Embedded finance requires robust security measures to protect against potential threats and breaches. This normally involves encryption, data masking, tokenization, and other security measures to safeguard sensitive financial information and ensure data integrity. Our development platform is fully secure and we have all the requisite certifications, including PSD2 and PCI DSS.

Compliance and regulatory tools

Compliance and regulatory tools are required to manage and monitor compliance with relevant financial regulations, such as reporting, auditing, and monitoring tools to ensure adherence to applicable laws and regulations. Not only is the Toqio platform fully compliant, we collaborate with our colleagues at Thistle Initiatives to offer customers the most up to date compliance resources on the market.

UI & UX

The user interface and user experience (UI/UX) of an app or website are critical for delivering a user-friendly embedded finance experience. This involves designing intuitive screens, smooth workflows, and clear transactional flows to enhance user engagement and satisfaction. The Toqio platform allows companies to build apps or sites where the UI and UX have already been painstakingly analyzed and designed, so that all aspects of the interface are customizable and editable. We’ve already created the framework, customers can do as much or as little as they like on the platform with the full support of our design and technical teams.

Cross-platform compatibility

This is crucial in software development. It ensures a consistent user experience among all devices, expands market reach, improves cost and time efficiency, enhances future flexibility, and promotes collaboration and interoperability among different platforms and systems. The Toqio platform can build apps that operate on Android or iOS as well as fully responsive websites to maximize reach.

Your stack, your way

A technology stack varies and is contingent upon the embedded finance service being offered, the platforms or providers being integrated, and the regulatory requirements in the relevant jurisdictions. Hence, building with Toqio makes sense. We already have the necessary modules available for companies to craft and launch an embedded finance solution. We’ve also partnered with trusted and compliant third-party providers to leverage their unique capabilities. All a company needs to do is select the features that will make them successful and put them together to create their own relevant technology stack. Working with Toqio is indisputably the quickest and most efficient way to get an embedded finance solution into the hands of end users.

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