Despite the tremendous potential of embedded banking, it is not without some challenges. Its main advantage of frictionless banking may prove costly to customers by facilitating impulse buying patterns. Additionally, the model does not fully fit in with current regulations and involves systemic and regulatory risks. Since these models are only just emerging there is still time for the sector to address these challenges quickly.
To thrive in the modern tech powered era banks must dissociate from the legacy systems and mindsets, and move towards consumer centric, personalized, contextual and insight driven solutions. As 5G becomes more pervasive, a new connected device ecosystem will emerge, which will in turn drive increased penetration of embedded banking services. Traditional banks must explore symbiotic partnerships with Fintechs and work with third-party vendors to offer a new innovative range of services. But at the same time, they must be careful to not become mere utility providers, to be leveraged by Fintechs and tech giants. Thinking beyond the core functionalities to become a platform orchestrator of a complete ecosystem of players is the way forward for the sector.
