Banxware Embedded Lending Blog

Embedded finance

How to leverage data to create fully contextualized embedded banking experiences

A Swan x Banxware Collaboration. We’ve put our heads together with our friends from to create an article on embedded banking features and how embedded lending can lead to a fully contextualized user experience.
Fabian Heiß
30 June 2023
8 minute read

When looking at embedded banking features, the hierarchy of possibilities almost resembles a pyramid.

At its base level, you find accounts. Accounts are the fundamental unit of banking. Every embedded finance journey starts with them.

For one, accounts are a place to store money. But they are also a place where data lives. Data which can be leveraged to build banking experiences that can drive revenue for your business, keep your customers engaged with your product, and deliver a speedy and fair experience that delights users.

Let’s take a look at how you can build up to a fully textured suite of financial features by working with embedded bank accounts. These complementary products leverage data at each step of the value chain to deliver ever greater benefit for end users.

By starting with accounts, you can put together an ecosystem of embedded banking products that features the ultimate cherry-on-top: data-driven lending that delivers cash to end users at their point of need on favorable terms.

On the flip side, it also works quite well to start with an embedded lending product suited for a given context and then move onto payments thereafter. There really are numerous ways to play the embedded finance game!

Embedded accounts bring data foundations

Many companies have taken advantage of embedded finance to offer banking accounts to their customers. Financial management software companies, which often are already integrated into key finance workflows, have been some of the most enthusiastic adopters of embedded banking.

Pennylane, one of Swan’s long-time partners, began their journey by offering customers an interface to view invoices. But quite quickly, they understood that to build a defensible and robust offering, they needed to embed real deal financial capabilities.

They worked with us to develop a digital wallet product, whereby a Swan bank account is opened on behalf of their customer. The account is topped up by the end user and is used to pay invoices that previously were available as ‘read-only’, so to say.

Certainly, the primary benefit of accounts for a financial management company like Pennylane lies in providing a place to store money and then subsequently make easy payments. But, from a product perspective, the embedding of accounts into the customer experience also unlocks access to data (balances, money in/out, who is getting paid and when, etc.) which can be put to work as the foundation for further embedded finance experiences.

Embedded payments offer even deeper insights

Embedding accounts within your platform is important for providing greater user functionality as well as gaining more insight into valuable customer data. That said, API-driven payment orchestration is exponentially more powerful for you as the provider and for your customer, too.

In a study, consulting firm EY calculated that payments through embedded channels reached $2.5 trillion in 2021 and is estimated to reach $6.5 trillion in 2025. This presents a huge opportunity!

If we think about one of the other archetypal use cases, such as branded cards for corporate expense management, the ability to execute payments is a game changer for many users. Instead of having to front and then report every purchase, employees need to simply pull out their dedicated corporate card and buy whatever they need. All reconciliation and tracking is done in the background, via a series of API requests.

The capturing and then making use of data is also simplified tremendously. Everything — value of transaction, vendor ID, time of day, etc. — is tracked and neatly organized into the company’s system of record.

With embedded accounts and payment capabilities, you now have a treasure trove of data as well as insights into how your users move and store their money. You know what their average monthly balance is, with which vendor they spend the most amount of money, and much more relevant information.

With this data, generated from banking features you embedded into your product, you have an excellent basis on which you can build an amazing embedded lending experience. One that is fast, fair, and tailored particularly to the customer’s needs by relying on existing financial data on the platform.

Embedded lending can lead to a fully contextualized user experience

Banxware, a leading provider of embedded lending solutions for platforms, has successfully shown how companies can embed financing into their product suites by leveraging key financial data.

The embedded lending company works with platforms like Payment Service Providers (PSPs), Marketplaces, Finance Management Providers, and eCommerce shop systems. One of Banxware’s customers is Payone, a leading German PSP. As an example of how Banxware works, merchants using Payone to accept payments can also access business loans through the PSP. The financing is underwritten using the data Payone seamlessly collects when capturing payments on behalf of the vendor. This results in fairer terms for the business and better risk assessment for Banxware, because the insight into the company’s cash flow position is far more granular and precise than through traditional financing processes.

Moreover, both Swan and Banxware partner with Agicap, a leading European cash flow management solution. With Swan, the company embeds bank accounts and the capability to pay business invoices. In collaboration with Banxware, Agicap offers a financing product that enables customers to receive a cash advance on future revenues. The terms of this short-term loan are influenced by the financial data drawn from the embedded accounts of customers. If the business has a low average balance or is consistently spending more than it is taking in, as an example, the financing terms are adjusted accordingly.

Embedding financial services will use data layering to maximize efficacy

The next generation of lending experiences is being powered by embedded financial data. Our world, especially that around our finances, is more technologically interconnected by technology than ever before. Consumers and businesses alike are insisting on doing their banking ever closer to their point-of-need. Fintechs and other companies will need to find ways to stack (embedded) financial services on top of each other to ensure excellent user experiences.

From our perspective, the future of banking is indeed bright. The flexibility and capabilities of providers like Swan and Banxware will only increase and, with it, the opportunities to capitalize on users’ financial data by offering them financial services that are fast, secure, and deliver an amazing user experience!

Specials thanks to David Frei and Max Cuttler from Swan for creating this blog post.

Want to know more? Watch our chat with David Frei, Head of DACH @ Swan and Fabian Heiß, Co-Founder/CPO @ Banxware chat about the opportunities in embedded payments and lending, go-to market challenges, and the future of embedded financial services layering data to create contextualized user experiences.

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