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How Embedded Finance Is Revolutionising Financial Services in Southeast Asia

by William Dale, Regional Vice President, Mambu May 8, 2023 0 comments

Embedded finance is a thriving trend that is rapidly changing the banking and financial services landscape in Southeast Asia.

With around 290 million unbanked consumers in the region, embedded finance has the potential to help improve financial inclusion for those who were previously excluded from the formal financial system, as well as offering unrivalled convenience and efficiency to consumers.

As the benefits of embedded finance solutions become more widely recognised, traditional banks are facing increasing competition from digital banks and fintechs utilising embedded finance to offer financial services through non-financial channels.

Frontrunners in embedded finance

Several Southeast Asian companies are already experiencing success by capitalising on the potential of embedded finance.

For example, Cake by VPBank, a digital bank in Vietnam, offers its customers the ability to link their Cake account to other digital wallets and e-commerce platforms, as well as ride-hailing service Be, enabling them to seamlessly access a range of financial and non-financial services at their fingertips.

Similarly, UNOBank in the Philippines offers a range of digital banking and lending services to customers via its partnership with AI-led fintech Trusting Social, which leverages access to telco data to provide credit assessments for consumers who would otherwise struggle to access formal credit.

Bank INA, a digital bank in Indonesia, is another example of a company that has successfully utilised embedded finance. Bank INA has partnered with various non-financial platforms, such as ride-hailing and e-commerce platforms, to offer customers access to a range of financial services such as loans, savings accounts, and insurance products.

Driving financial inclusion through embedded finance solutions

By offering financial services through non-financial channels, embedded finance can help improve financial inclusion for those who were previously unable to access financial services via traditional means.

For example, unbanked individuals who rely on cash transactions can benefit from the convenience of digital payments, which can be accessed through non-financial digital platforms (i.e. smartphone apps) they are already familiar with.

This can help them build credit, save for the future, and access financial products that were previously out of reach.

The rise of embedded finance has also resulted in banks providing financial services to underserved communities through non-traditional channels, such as mobile devices and e-commerce platforms.

By leveraging embedded finance, banks can reach a wider audience and provide financial services to those who were previously excluded from the formal financial system.

As the demand for embedded finance grows in Southeast Asia, organisations from a wide range of industries have the opportunity to leverage next-generation technology to create new value-added services for their customers.

This includes the use of artificial intelligence, machine learning, and data analytics to provide hyper-personalised financial services that meet the unique needs of each customer.

Embedded finance: A disruptive force in financial services

Embedded finance is revolutionising the banking and financial services industry in Southeast Asia, effectively driving financial inclusion for those consumers who have been excluded from the formal economy, and offering consumers personalised services and unprecedented levels of convenience.

The success that organisations like Cake by VPBank, GoTyme Bank, and Bank INA – and many more – are experiencing by incorporating embedded finance solutions into their offerings highlights the enormous potential this approach can offer to businesses looking to provide innovative financial services through non-financial channels.

As financial and non-financial organisations continue to leverage next-generation technology, and the adoption of embedded finance continues to grow in Southeast Asia, the potential for further disruption in the banking and financial services industry is boundless.