Integrated finance – when non-banks offer banking-like services – should be worth $ 3.6 billion by 2030.
Startups can now jump into the action using their customer data and relationships to deliver personalized services, but what services should they offer and when? And which sectors have the most to gain?
In our last Sifted Talks, we integrated into integrated finance and asked the big questions to our panel of experts:
- Andy Barker, executive vice president of payments at online marketplace software company Mirakl
- Joost Brugmans, co-founder and CEO of the Orderchamp wholesale marketplace
- Iana Dimitrova, CEO of Global Payment and Banking Platform as a Service OpenPayd
- Alex Graf, Co-Founder and Co-CEO of Spryker Digital Commerce Cloud Platform
1. More than 70% of brands are considering getting into integrated finance
While integrated financing is not new, the sector is still in its infancy and is only growing. For Dimitrova, there are two reasons: one regulatory push of the European Commission seeking to stimulate banking innovation and the influx of new technologies.
Dimitrova mentions a recent OpenPayd investigation which found that over 70% of brands plan to launch integrated financial services within the next two years, showing “a sea change in the way companies think about their customers.”
âWe should not underestimate the combination of this regulatory change and the openness of technologyâ¦ This is something that leaders are thinking about very actively. And not only think, but essentially plan to generate income, to generate returns, from some form of service or financial product integrated with the rest of their business. “- Iana Dimitrova, OpenPayd
2. Integrated finance is not for everyone
According to Barker, integrated finance is a lot like “shiny red object syndrome” where everyone sees big numbers and wonders what they’re missing. But just because you can adding built-in finance to your product offering doesn’t mean you should.
âYou have to trust the customers and the data you have before you start looking at the numbers potentially on the sheet,â he says. âBecause if you do it wrong, most of the time you only get one hit. ”
Brugmans agrees, saying you shouldn’t look to integrated finance just to earn extra profit or lighten your financial FOMO, but as a way to create a better customer experience.
He says startups looking to get into integrated finance have two options: partner with a payment provider and add it on top to generate additional revenue, or you can build and sell the full service yourself. and challenge the existing banks which are not modernizing as quickly.
âBanks are traditional beasts. They struggle with their cost structures and manual processes and they can’t really serve the customer the way they want, digitally, online, etc. – Joost Brugmans, OrderChamp
3. Let your customer guide you
Integrated finance is a big umbrella – it could mean adding anything from a debit card or credit service to BNPL and integrated insurance. So how do you choose which one to add?
Echoing Brugmans and Barker, Dimitrova argues that choosing an integrated financial service should always start with the needs of the client. This, she says, will help them stay addicted.
âIf it’s just a one-time transaction, they’re not really spending enough time on our platform,â she says. âSo let’s take a look at other customer needs that we can’t serve today to provide a more holistic experience. “
Barker says which service you choose also depends on the nature of your business and what your customers expect from you in particular.
âIf you are a traditional retailer, you can integrate instant credit or BNPL capabilitiesâ¦ If your business is a platform, where you are building something to serve other businesses, there might be opportunities for you to ‘add features such as currency conversion, real value time bank, financing or card issuance. – Andy Barker, Mirakl
4. Do like Tesla, Uber and Peloton
According to Graf, we must forget about the first decade of integrated finance where every business seemed to simply issue its own credit card. Instead, he says, startups should build on the platform economy and add features that will keep customers on your platform.
Graf uses the electric car maker Tesla and the Peloton fitness platform as examples. To use their services, âyou don’t have to enter your credit card,â he says. “It is only through integrated finance that this type of experience is possible.”
Barker says startups should think of integrated finance like Uber because the startup hasn’t changed payments – you still have to pay for your Uber ride – but they’ve removed the unnecessary exchange of money or the use of money. ‘a credit card distributor, both driver and customer.
“We see it in the Tesla compressor, there the whole process is frictionless because it’s built in, you just take out the charger, insert your card, charge and that’s it.” – Alex Graf, Spryker
5. You don’t have to be a bank to use integrated finance
Brugmans uses integrated finance in his own startup, the Orderchamp online marketplace, but says he doesn’t want to become a bank or fintech in the process. But, he says, integrated finance has kept it competitive.
âI don’t want to become a formal financial institution like a credit company or even a traditional bank,â he says. âMy goal is to get unique merchandise in every store because these retailers have to compete with online giants like Amazon. “
Dimitrova says most of her clients (and the rest of the market) don’t have an interest in becoming a financial institution either, but integrated finance gives them the best of both worlds.
âHaving the ability to integrate these financial services saves us from having to think about it, concentrate, spend time or money on it and this is where the value of a supplier d ‘infrastructure comes into play. â- Iana Dimitrova, OpenPayd