As digital transformation has swept through the financial services industry, banks have had to embrace it.

Within this environment, banks do not only have to provide digital solutions and experiences, but must also integrate with consumers’ lives. Embedded digital banking, which refers to integrating digital banking platforms within other areas of customers’ digital lives, is the way forward for incumbent banks. Companies like Acorn have done a fantastic job at this, embedding themselves within already existing processes. Acorn users don’t have to actively do anything for the application to work. Acorn takes care of business in the background, fueled by normal banking activities. For incumbents to succeed in a fintech environment, they must adapt their offerings to their customers’ lives. 

A shift to embedded digital banking

Banking is adapting toward intuitive and invisible banking experiences that prioritize the customer. This requires a mindset shift for banks; instead of a siloed approach to product development, banks must focus on the overall customer experience and journey, including looking for potential touchpoints outside the established standards.

The banking industry has come a long way, but to evolve, it will have to do more. One solution is for banks to partner with fintechs, with both sides recognizing a need for sharing their strengths. These partnerships and data sharing practices, enabled by things like open banking, allow banks to tactfully entrench themselves in customers’ lives.

Large data sets from various sources (and using that data to provide products and offers in real time) will be the foundation for these agile, comprehensive digital banking platforms. People use financial products every single day. The data they generate is valuable for product development teams looking for new avenues for product development as well as marketing teams expanding their strategies. For this to happen, banks will have to examine entire customer journeys, and opportunities to fit in. 

Embedded digital banking is the next frontier. Digitizing products and processes is relatively straightforward, if not easy. However, it is a daunting challenge because of the creativity and finesse needed. The banking world will look very different in 20 years. Some of the most interesting potential developments are: 

Predictive purchase analytics — One example would be leveraging analytics to parse a customer’s payment history. This would determine major life events that may require financing or a loan. They leverage their own customer data sets in order to determine this, setting an AI to work flagging relevant events. If a customer is purchasing coffee roasting equipment, the bank may infer they’re looking to start a coffee shop and send marketing material offering good introductory rates on a small-business loan. Or, if a customer is purchasing parenting books online, the bank may send them long-term investment options geared toward saving for college. 

Contextual credit access — This will involve changing credit line amount and access depending on the circumstances of the individual or business requesting it. Essentially, contextual credit access means leveraging real-time data from multiple sources to raise and lower credit depending on input from relevant sources.

Predictive cash flow analytics for businesses — Businesses engage in complex activities that move large amounts of money around. Cash flow management has always been a key activity to ensure success, but is also static and not future-focused. AI-enabled analytics solutions designed to predict cash flow based on historical and real-time data will become a vital part of business. 

Behavioral savings tools and prompts — Smarter savings tools are already offered by fintechs like Acorn, who automatically allow their customers to save without additional input. Financial institutions will have to offer similar solutions to stay competitive. This should be easier to accomplish because banks already have access to individual financial activity data for their clients. 

Robo-assisted business investing — Robo-advisory software for businesses are already available, but ensuring timely access will be key to their adoption. Businesses can use robo-advisors to handle investment activity; based on user input, these tools may even auto-invest for employee retirement funds. Giving small businesses access to retirement options for their employees will attract top talent to their company. 

The future of digital banking

The digital banking future is here. Banks now have to look into the next stage of development for their digital offerings. Leveraging the digitization of their customers’ lives will enable the creation and implementation of embedded financial products and experiences. The more unobtrusive touchpoints finservs can create for their customers to interact with them, the more relevant and necessary the finservs become. 

Interested in small business fintech tools? Check out our financial services software categories to find solutions that fit your business.