15 ways RegTech boosts embedded finance for FinTechs

Embedded finance is taking the FinTech community by storm, and even trickling into the mainstream. 91% of business leaders today more or less understand the term… And it’s likely that 100% of us will be using it ourselves over the next couple of years.

Embedded finance is the term used to describe the integration of financial services into non-financial organisations. It enables these companies to provide financial services to their customers by connecting FinTechs and banks to their product through APIs.

But as the momentum and excitement for embedded finance soars, there could be one department in the bank that doesn’t feel so thrilled. The compliance team. Already swamped with excel spreadsheets, feedback loops, fresh regulations, and policy overhauls… An entirely new open software system is probably the last thing they want to add to the to-do-list. Luckily, there is a technology which takes the hassle out of embedded finance, and significantly speeds up the process.

Here are 15 ways RegTech boosts embedded finance for banks:

Launching new products

1. Quicker launch to market

Built-in compliance from day one means product development teams can avoid many of the painful approval loops at the end of the process.

2. Valuable marketing insights

The incredible amount of data gathered by RegTech platforms can guide product developers and marketing teams to make more impact.

3. Stronger product creation

When RegTech is embedded into the DNA of a product – rather than as an afterthought – the product becomes futureproof.

4. Going global is less of a headache

A major advantage of RegTech software is that it can sync up with RegTech in different regions and even different jurisdictions. This turns a major regulatory challenge into an exciting market opportunity.

5. Effortless onboarding

Gone are the days when customers needed three months’ worth of bills, a rental contract, passport and physical meeting. With RegTech, most of the onboarding can be done in a matter of minutes from a smart phone.

Retaining customers

6. Hyper-personalisation

When customer data is stored and processed meaningfully by RegTech platforms, lucrative hyper-personalisation options become possible. For example, if customers are routinely dipping into unarranged overdrafts, RegTech, open finance and embedded finance can work together to offer a more appropriate option, at zero extra cost or effort to banking employees.

7. More appropriate credit options

Customers can opt for credit products which are best suited to their holistic financial need, not siloed accounts.

8. Superhuman speeds

Many routine decisions which used to require a human compliance offer can now be completed in microseconds, speeding up waiting times for customers.

9. Avoiding costly regulatory scandals

Breaching regulations does not go down well with customers, and many banks cannot afford to take a hit to their reputation. RegTech helps to future-proof banks from this, as it updates new regulatory requirements, and runs constant checks on existing ones.

10. Improving experiences in and out of the bank

With embedded finance, customers have a vastly improved online experience, outside of their banking interface too. They can pick up all the financial products they need, effortlessly.

Making life easier for the compliance team

11. Quick and consistent reporting

RegTech can eliminate weeks of strenuous work to generate regulatory reports in a matter of minutes. This massively reduces the risk of late fees, overtime costs or human error.

12. Better risk management

Implementing RegTech across the customer journey, and especially across different service providers, means banks can get a holistic view of clients. Among other things this means more accurate credit scores and insurance risk assessments.

13. Stronger identity management

During the onboarding process, RegTech can seamlessly strengthen KYC, AML, and anti-fraud checks, at no extra burden to the compliance teams.

14. Transaction monitoring

Compliance teams never need to miss a thing with live transaction monitoring and red flag alerts.

15. Real-time regulation monitoring and expertise

Being ahead of schedule and meeting new requirements is much easier with RegTech, which continuously scans the metaverse for regulatory updates. What’s more, the technology can even support with areas which may be outside the compliance department’s expertise, such as with incoming blockchain policies, for example. This saves significant time and money on sourcing expensive specialist consultants.

7.2 trillion more reasons to speed up embedded finance

Embedded finance will be worth a mind-blowing $7.2 trillion by 2030, according to the expert research at OpenPayd. The UK alone is expected to snatch up a big part of that – a whopping £230.48 billion over the next five years.

It’s fair to say that embedded finance is likely to overshadow traditional banking, and one day, customers may have zero interaction with banks at all. If they want a mortgage, they will apply at the point of sale online. If they need a car, they’ll apply for finance and insurance together at the checkout.

The world is quickly moving towards a super convenient, hyper personalised online supermarket. This means that some banks have a huge opportunity to become dominant players. But the majority will most likely fade into the background. After all, there are a limited number of platforms needed to make embedded finance work… And right now, it’s first-come-first-served. The market is open for banks to surge ahead. Those who can get better products out faster, while adhering to every letter of the law will be the ones who close the race.

Now more than ever, the future of our finances lies in the already-full hands of compliance teams. RegTech is the only viable solution to meet all the requirements and exceed expectations. Transforming the compliance department from a slow and overworked obstacle into a highly profitable enabler could be just within reach.

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