Despite the phrase dominating headlines over the last year or two, the embedded finance market is not a new concept in France. Our recent report with Finextra, ‘The Future of Embedded Finance 2022: Which European stakeholders will win or lose?’ discussed how momentum toward embedded finance has been building slowly but surely over the past decade.
This has occurred as demand for seamless e-commerce solutions push both financial and non-financial players to serve their digitally discerning customers more effectively. In addition to customer expectations driving this evolution, companies have increasingly
seen the potential to monetise digital opportunities and the need to reinforce loyalty with a competitive portfolio of services.
What’s different in 2022?
The market is bubbly, has high potential and I believe that innovation in France specifically has been one of the major drivers for embedded finance trends across Europe. While the emergence of the fintech market led to dynamism in terms of funding and partnerships,
the French ecosystem presented some particularities, such as a strong trend among legacy banks that acquired fintech players and Banking-as-a-Service platforms. This was the cause of a reinforcement of the BaaS services in France by piggybacking.
According to CFTE, France raised almost $1.7 billion across 190 deals from 2014 to 2019. More than 85% of these deals involved companies based in Paris and fintech investment in France was more than 80% higher in the first half of 2019, compared to 2018
in its entirety. Six transactions were valued above $50 million in 2019 and in 2020, fintech investments in France reached $839 million. These figures are set to increase substantially as the embedded finance industry reaches maturity.
At Solarisbank, we see banking-as-a-service (BaaS) as the answer to feeding this need for embedded finance and the real tool for providing the best possible customer experience and improving loyalty. Sticky customers are the best, and the urgency felt by
traditional financial institutions to digitally evolve is also allowing digital banks and non-financial brands to compete by ensuring they also build their customer base.
Beyond payments and the lending opportunity
Digital banks in France have paved the way for a customer-centric vision in financial services by focusing on the value proposition and it is really the technology - the integration of APIs - that truly provides an efficient experience from end to end. While
the implementation of customer centricity started with payments, at checkout or more recently with instalment lending initiatives such as buy-now-pay-later (BNPL), the number of touchpoints for customers offered by banks and non-banks are increasing.
An increased number of touchpoints results in additional revenue, and this is a strategic trend we are seeing with banking-as-a-service in France, as the natural evolution of embedded finance moves from payments to lending. Further, given the fact that with
embedded finance, you retain sticky customers, lending products and other value-added services are a key driver for progression beyond account-based services.
Using Solarisbank as an example, we focused on an API-based banking infrastructure and successfully migrated all our core banking systems, digital products, and databases to the cloud in 2020. Our philosophy was to provide banking services from the start,
but other banks and non-banks may find that to offer payments or lending products, aggregation with different solutions via partnerships would be a better route for them. By becoming a ‘super app’, these organisations can also leverage their existing client
base.
The beauty of banking-as-a-service
The beauty of banking-as-a-service is that players that have credit offerings can reduce development time and gain support with regulatory compliance. Companies that are currently evaluating their investment in embedded finance will soon see that BaaS reiterates
the importance of customer satisfaction and customer centricity.
Therefore, embedded finance and banking-as-a-service is making a big difference in France as it allows organisations to become fast, reliable and their products and services become affordable to a wider customer base. Every company can become and will become
a fintech company.
Download and read the new Finextra report with Solarisbank here: The Future of Embedded Finance 2022: Which European stakeholders will win or lose?