Want to build a digital ecosystem? Start with embedded finance.

If you are not building a digital ecosystem yet to supplement your own services, now is the time to start. Strategy consultants like McKinsey or Accenture are urging companies to become the leader in these ecosystems if they don’t want to be left behind. Don’t know where to start? Embedded finance is a good first building block when forging a more complete portfolio of services.

Do you wonder why you should build a digital ecosystem? Well, how about attracting new customers and making your existing customers more loyal, thus preventing churn? If your customers use your services through a mobile app or other digital channels, you surely want to enhance customer experience, so that they visit these channels as often as possible. The more they encounter your organization, the likelier they will be to spend a larger portion of their business with you. It is no secret that today’s consumer wants convenience. By building a digital ecosystem with a range of services that are adjacent to your own service and provide a ‘one-stop-shop’ experience to the consumer you are catering to that desire for convenience.

Digital ecosystems as growth engine

Digital ecosystems abound. Just think of banks offering third-party insurance products, home improvement services, utility contracts… Just think of airlines promoting hotels in the cities they fly to, luggage insurance or rental car services. Just think of music streaming services letting you order tickets for their artists’ concerts, or even allowing artists to sell merchandise and NFTs. In doing that, the streaming service turns itself into a supermarket for anything to do with music.

Customer loyalty is one goal, financial benefit is another: organizations monetize these extra services by taking a small fee from the third parties they are partnering with, or by combining third-party services with their own offering into a premium-priced bundle. That way, digital ecosystems become a new source of revenue.

When choosing what complementary products to offer, you can take different tracks: take the most popular services to attract new customers or take the most lucrative ones – embedded finance is the option that combines both.

Consumers will consume

After embedded mobility (households on average spend 10% of their budget on mobility), embedded finance is the most popular addition to digital ecosystems. One thing is certain: consumers will consume:  they order from web shops, buy snacks and coffees, invest in cryptos, check their investment portfolio… They want to have access to the state of their finances wherever they are, whatever they are engaging in at that moment. By offering that convenience while they are consulting your app or digital channel will ensure they stick on your platform.

The beauty of embedded finance lies partly in the sheer number of applications that are currently available: embedded payments, embedded card payments, embedded insurance, embedded lending, embedded investments, embedded banking…. The sky is the limit when it comes to what financial services you can embed in your platform, whatever your business is. Take the example of Belgian FinTech Monizze, which offers meal vouchers, eco vouchers and gift vouchers. Their application can be added to banks’ apps, but also to the HR services apps used by companies that offer these vouchers as fringe benefits. This gives employees the chance to check the status of their meal- or eco vouchers through the apps they use to manage their other HR-related activities.

In an economy rife with change both traditional banks, neobanks and FinTechs are looking for new opportunities and extra distribution channel. They are eager to work with anyone enriching their offering with additional products and services.

IAM as the enabler of embedded finance

Any activity involving payments and financial services is legally controlled and requires a high level of security. After all, it’s about people’s money! This is where Identity and Access Management (IAM) comes in. An IAM solution like TrustBuilder will not only ensure security for both the user and the service provider but will also ensure that consumers can move from one service to another without having to reauthenticate at every handover. Step-up authentication will only be required when users want access to sensitive information or when payment thresholds are exceeded. IAM is the glue to any digital ecosystem. If you want to embark on embedding finance into your digital channels, make sure you contact us first.


Frank Hamerlinck

Frank Hamerlinck

As co-founder of global trade management leader Porthus, customer experience platform NGDATA, and strategic consulting services company innacco, Frank embodies the entrepreneurial mindset. His 20+ years of ICT experience is complemented by his position as ‘Entrepreneur in Residence’ at iMinds and coach at Netwerk Ondernemen.

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