Embedded Finance, a transformative approach where financial services are integrated into platforms that businesses and consumers already use regularly, is revolutionising the banking industry by making financial services more accessible and user-friendly.
Payments are the common thread linking all commercial exchanges and integrating them into familiar platforms can significantly improve customer experiences and business efficiency.
The global Embedded Finance market size and share was valued at USD 82.48 billion in 2023 and is anticipated to generate an estimated revenue of USD 1,029 billion by 2032, with a CAGR (compound annual growth rate) of 32.4% from 2024 to 2032.
At HSBC, we believe that this integration is set to be a critical competitive differentiator in the future.
Our ‘Everything-as-a-Service’ strategy for payments is a prime example of how Embedded Finance is being brought to life. We are currently working with partners to integrate our payment capabilities into the platforms that our clients use to run their businesses, which does not only help differentiate our offering but delivers real benefits for customers.
Another area where we have seen great success is with embedded virtual cards. We are the first global bank to integrate virtual cards into Oracle Fusion Cloud ERP and will soon be the first global bank to integrate with the SAP Taulia platform. This integration enables our customers to make payments using virtual cards within native platforms through a streamlined and automated process, improving working capital and operational efficiency.
HSBC is also embedding its payment solutions into client onboarding processes. Recently, we ran a pilot in India (and subsequently launched in the UK and US) of ‘HSBC Smart Transact’, a new solution designed to provide clients with non-complex requirements with everything they need to move money domestically and internationally. This solution reduces onboarding time, internal handoffs, and the amount of data required, ultimately improving the client experience.
The economic and geopolitical landscape has evolved significantly post-pandemic, driving a notable shift in the B2B payment space. In particular, the shift in working practices has prompted CFOs to reassess their digitisation agendas, particularly regarding payment processing and execution, which now need to be seamless and location-independent.
For banks and financial service providers, this shift in expectations means integrating banking services into the platforms where customers transact and do business. Embedded Finance solutions, such as those integrated into systems like SAP, exemplify this trend by breaking down traditional silos and providing an integrated interface for financial transactions.
Additionally, the increased use of AI in business decision-making, particularly in procurement and payment solutions, and the growing emphasis on sustainability and corporate social governance practices, are helping to shape the future of Embedded Finance. These trends are driven by consumer demand and regulatory pressures, underscoring the need for ongoing innovation from banks.
Data privacy and security remain paramount as financial transactions take place on apps. Protecting sensitive information will remain a key priority, driving significant investment in regulatory compliance, particularly with regulations like GDPR. AI can play an important role in detection and access point security, ensuring that as we continue to innovate, we protect against fraud. Despite these challenges, fraud should not limit innovation – instead, it should reinforce our commitment to secure, efficient, and transparent payment solutions.
Integrating cards into Embedded Finance solutions, for example, can offer numerous benefits, including favourable chargeback rates and fraud protection. For treasurers, this integration can generate new revenue sources, accelerate payments to suppliers, and improve working capital by extending the Days Payable Outstanding (DPO). Organisations are increasingly interested in leveraging Embedded Finance for procurement and other areas. Banks can offer card and trade solutions directly within these platforms, allowing corporates to choose the most suitable solutions for their needs. This virtually friction-free procurement process is highly attractive to businesses.
For banks, the focus must be on adopting these behaviours and presenting solutions that leverage Embedded Finance in the corporate space. By simplifying processes for procurement managers or accounts payable officers, banks can strengthen corporate relationships and drive business success.
HSBC’s approach to developing Embedded Finance solutions involves carefully examining customer platforms and placing financial services where they are most needed. This reduces manual processes, enhances real-time financial insights, and provides cost-saving benefits without requiring significant new investments in technology. We understand that our customers want to grow rapidly and internationally. They need to manage risks in a constantly evolving environment. As a leading international bank, we are committed to delivering these experiences to our corporate clients. By embracing Embedded Finance, we aim to offer innovative, secure, and efficient financial solutions that align with our clients’ needs and help them thrive in an increasingly digital and interconnected world.
This editorial piece was first published in The Paypers' Embedded Finance and Banking-as-a-Service Report 2024, which is the latest comprehensive market overview and analysis focusing on the key players and products within the Embedded Finance and BaaS ecosystem.
Manish Kohli joined HSBC in 2021 as the Head of Global Payments Solutions, where he focuses on growing the GPS business across the world, and further strengthening and expanding our product capabilities and digital tools to support HSBC’s clients’ needs. He is a keen industry advocate, having previously chaired the Payment Risk Committee of the Federal Reserve Bank and featured in the inaugural Business Insider ‘100 People Transforming Business’ list.
HSBC is one of the world’s largest banking and financial services organisations. Our global businesses serve around 42 million customers worldwide through a network that covers 62 countries and territories. Our customers range from individual savers and investors to some of the world’s biggest companies, governments and international organisations. We aim to connect them to opportunities and help them to achieve their ambitions.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now