From embedded finance to embedded real estate: the future of banking in a changing landscape

Embedded finance is the emerging business trend of today. In parallel, embedded real estate is a strategic topic which banks, wealth and financial services providers need to focus on when striving to remain relevant and generate revenue. With traditional banking undergoing a radical transformation and shifting towards more customer centricity, this article highlights how institutions and companies can leverage embedded services to get closer to their customers.

Embedded finance, real estate & Co. lie at the heart of banks’ strategy to get closer to their customers

Defined by Forbes as “the use of financial tools or services — such as lending or payment processing” — by a non-financial business, embedded finance is designed to streamline financial workflows with the consumers in mind.

According to a recent study conducted by consulting firm Accenture and embedded payments platform Plaid, nearly half of U.S. non-bank platforms are investing-in and plan to offer embedded financial services in the future. The same tendency can be observed in Europe's banking landscape.

Similarly, embedded real estate can be defined as the use of real estate solutions in different environments –– and in this case, in the banking or financial environment –– with the goal of enhancing the customer experience. It is a strategic topic which banks, wealth and financial services providers need to focus on when striving to remain relevant and create real-time cash flow and new revenue streams.

Capgemini analysed the movement towards leveraging data to offer banking as a hyper-personalised user experience with customer-centric banking services. In its 2021 Retail Banking report, Capgemini mentioned the concept of “experiential banking 4.X”. Experiential banking can be defined as the era in which banks and financial institutions collect and leverage data “to create experiential customer journeys through intelligent and personalised engagements”. In CRI’s more recent report “Retail Banking: Top trends 2022”, the consulting firm placed experiential banking in the top right corner of its priority matrix, considering that “firms that engage in data ecosystems will be future frontrunners by offering customers contextual and lifestyle banking experiences.”

In a recent report, McKinsey also highlighted the need for banks to rearticulate their value proposition and focus –– among other topics –– on building “home-and life-events digital platforms [that would] increase customer value through ecosystem partnerships supporting end-to-end journeys for major life undertakings, from search and selection to financing and ongoing management and maintenance”. This is exactly what embedded real estate is all about, and its transformation is already underway.

APIs as enablers of a true end-to-end customer journey

This transformation is driven by another major shift in the banking industry: the increased usage of APIs —— an efficient way for institutions to add components to their customer experience and create end-to-end journeys, without having to build them themselves. As pointed out in January 2023 by McKinsey, “becoming proficient with APIs is a top objective for most banks as they continue to invest in API programs”. The firm conducted a global survey on the use of APIs in banking and found that “banks are gaining confidence and steadily improving their API maturity along key strategic, technological, and people dimensions”

Another interesting finding is the shift in objectives related to API programs. While innovation was ranked fifth in McKinsey’s 2020 survey, it became the number one reason for API deployment two years later. Moreover, McKinsey notes that the banks which have managed to implement successful API monetisation strategies share this key objective, they “actively scan the market for new trends and developments”, among other initiatives. API implementation comes with the ability to identify new trends and emerging topics.

In future, banks will shift towards having more focus on customer needs, with APIs forming part of the foundation. As it turns out, financial institutions have already started adopting a new approach, use cases of which are highlighted in the following section.

Embedded finance vs real estate: what is the business impact for banks, wealth management and financial providers?

Embedding real estate experiences into digital banking, wealth or financial environments enables even small businesses to get closer to their customers. It also enables business owners to become and remain relevant in the wake of changing consumer habits and expectations, evolving demographics and with increasingly crucial matters such as ESG. But, what does that mean in terms of business impact?

Our new banking ebook includes an in-depth overview of the challenges that institutions need to tackle and the key performance indicators they should pay attention to:

Embedded finance and real estate determining the future of banking

As banks and financial institutions strive to stay relevant amidst changing consumer habits, demographics and emerging technologies, embedded finance and embedded real estate have emerged as the key trends to shape the future of banking. Embedded real estate increasingly leverages real estate solutions in the financial environment to create end-to-end journeys that enhance customer experience. As banks invest heavily in these trends, they must also overcome the key challenges and issues that come with these shifts. For more in-depth information on embedded finance and real estate, including case studies and analysis of more than 15 experts, you shouldn’t miss our ebook.