Is 'embedded finance' the future of banking? Pinar Ozcan talks to IBM's Likhit Wagle
When is a bank not a bank? The answer these days is increasingly either ‘when it’s a fintech’ or, particularly in the Asia Pacific region, ‘when it’s a shopping platform’.
In a discussion with Pinar Ozcan, Oxford Saïd’s Professor of Entrepreneurship and Innovation and Director of the Oxford Future of Finance and Technology Initiative, Likhit Wagle, Managing Partner in Financial Services, IBM Consulting EMEA, describes how some banks are responding to the rise of tech companies and new consumer attitudes with not only new services but new relationships with retailers and a range of other financial services companies.
Mobile payments are the latest example of a leapfrog technology that has enabled many emerging economies to ‘skip’ stages of development and, in this case, the cumbersome payments infrastructure of Western legacy systems.
Wagle describes how governments are using this to promote financial inclusion by bringing people who were previously unbanked into the financial system; this also helps reduce corruption and allows families to have greater control over their budgets. But where Western banks really ought to be directing their attention is towards the big tech companies, such as China’s Alibaba, which started offering customers payment systems on the platform, followed by lending and now, says Wagle, other financial services too. Grabpay started life as a ride-sharing app, but now functions as a payment method for food deliveries, subscriptions, and other services.
Are we looking at a ‘Kodak moment’ for banks, as swathes of their traditional services disappear to challengers and tech platforms? Or can they adapt by bringing together their own ecosystems of retailers and service providers, using the data they generate to improve the services they offer their customers? Is it true, as Ozcan says, that ‘embedded finance is really the future of finance’?
Watch the video to decide for yourself.