Embedded finance is a strategy that allows financial institutions to embed their services into third-party digital applications. For example, you might acquire a consumer loan and insurance for a vehicle through an auto retailer’s application, set up scheduled payments and travel insurance via a travel app. Other examples include incorporating cash management capabilities inside a corporation’s resource planning platform and embedding trade financing products inside of a logistics application. Simply put, embedded finance lets you use financial products and services through a non-financial channel or application.
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Embedded finance is a significant opportunity for almost every business in the financial services sector. It provides new routes to market for financial products and greater access to customers to increase potential revenue. Customers also benefit from more convenient, integrated experiences, resulting in greater customer satisfaction. In fact, embedded finance is expected to generate an estimated $230 billion in net-new revenue by 2025.1
Rapid service delivery and improvement are critical for embedded finance. Cloud platforms, modern software development approaches, and new application architectures provide an operational foundation for embedded finance.
Cloud technologies have prompted the creation of new digital platforms that help organizations deliver and scale digital services more efficiently. These platforms allow banks to build and manage microservices and application programming interfaces (APIs) with high levels of security to offer the digital experiences that financial services customers expect.
Cloud platforms bring together the tools and capabilities needed to develop microservices and APIs using continuous integration/continuous delivery (CI/CD) pipelines and DevSecOps practices. These approaches help you build security and scalability into your services from the start and maintain those features through the entire service life cycle.
Learn more about how Red Hat’s Cloud Services can provide the foundation for a modern digital platform.
What are microservices?
Microservices are an architectural approach where applications are broken into smaller, independent pieces that work together to deliver value to the organization.
What is event-driven?
Event-driven architecture is a way of designing applications and services to respond to real-time information based on the individual event notifications.
What is GraphQL?
GraphQL is a query language and server-side runtime for APIs that prioritizes giving clients exactly the data they request and no more, making APIs fast, flexible, and developer-friendly.
What are APIs?
Application programming interfaces (APIs) are sets of tools, definitions, and protocols for building application software. They connect products and services without needing to know how they're implemented.
What are the risks and compliance considerations?
Financial institutions operate with highly sensitive information and in many cases offer access to regulated services. Connections to third-party applications can open new attack vectors for unauthorized access to information and inappropriate use of services. As a result, you need to adapt your risk management processes and control frameworks, as financial institutions are ultimately responsible for ensuring that all interactions with their services are in compliance with their risk appetite.
Risk management should be fully integrated into your service development and delivery pipelines. For many organizations this means investing in additional capabilities to protect the software supply chain, along with new processes to effectively manage risk from opening up services to partners.
What is software supply chain security?
Software supply chain security combines best practices from risk management and cybersecurity to help protect the software supply chain from potential vulnerabilities.
What is API security?
Red Hat provides the technology and expertise to help you build a software foundation for embedded finance. Many of the most innovative financial institutions in the world use our technology. Using a hybrid cloud approach, we help organizations accelerate software delivery and access the same great development and operational experience, regardless of underlying infrastructure.
The combination of Red Hat® OpenShift®, Red Hat Application Foundations, and Red Hat® Enterprise Linux®, along with our award-winning services, training, and support, gives you the capabilities needed to create a modern digital platform for embedded finance.
- Made for microservices: Our integration technologies help you connect existing legacy systems, new platforms, and cloud infrastructure into a unified environment to streamline operations and increase visibility and control.
- Same great experience across any infrastructure: Our foundation abstracts the underlying infrastructure so you can develop, deploy, and manage services across any infrastructure—including on-site and off-site data centers.
- Robust partner ecosystem: Our broad certified partner ecosystem lets you customize your environment with your preferred third-party technologies and services, knowing that all components will work together reliably.
These capabilities give you more flexibility, scale, and choice when responding to expected and unexpected events like new regulations, cloud price increases, and changes to vendor and partner relationships.
1Source: Plaid and Accenture. “Embedded finance: Financial services whenever and wherever customers need them,” 2021