These concepts build connections between financial institutions and industries from retail to technology in order to reach the consumer at precisely the right time—the purchase

The new financial era requires thinking outside the box to devise new ways of offering services anytime, anywhere. In this context, APIs are the ideal means with which to evolve banking activity and take it to the sales floor.

By providing application programming interfaces and the connections they create with different software, banks can occupy a prominent space in other commercial platforms and thereby facilitate the purchase process without complicating the user experience. Consequently, banks and retail businesses are able to integrate and meet consumer demands while increasing their sales indicators.

To do this, they need to look to Banking as a Service (BaaS) and embedded finance models that allow their products to be hosted on third-party platforms. This not only expands the presence of banks but also their business landscape, as they can even serve the clients of other entities that, for example, use their technology to process payments.

These are also modalities that help attract new users with highly diverse demographic characteristics and who are drawn to financial offers provided by their preferred retail chains. One such example is Buy Now Pay Later (BNPL), or point-of-sale loans, such as those offered by the American fintech Sezzle, which recently entered the Brazilian market, offering its BNPL product through the Nuvemshop e-commerce platform.

The possibilities for tie-ups and new initiatives are as broad as the potential for creating APIs. 

EVOLUTION OF BANKING AS A SERVICE (BAAS)

Banking as a Service is the enabling of financial products on the platforms of other companies through APIs. Under this arrangement, a firm outside the banking ecosystem can integrate exclusive bank products into its website or application, using the licenses and technologies of the provider bank.

This technology allows us to, for example, make payments using our mobile fingerprint, purchase digital subscriptions without needing to add payment methods every time, or place an order with an e-commerce site without having to upload user information for each operation.

It is also the technology that allows the Colombian bank Davivienda to issue cards for the RappiPay platform or the bigtech Apple to launch an Apple Card in association with Goldman Sachs in the United States.

Alliances like these positively impact banks by allowing them to expand beyond their branches and digital channels. And for sellers too, since they can add financial products to their platforms, reducing the risk of users entering their interfaces and losing interest in the transaction they have initiated.

EMBEDDED FINANCE

We are facing a financial paradigm shift in which increasingly retailers will act as banks and banks as retailers, through integrated finance strategies or embedded finance.

This shift helps expand the banking ecosystem’s sphere of influence, and creates opportunities for becoming a provider not only of accounts and loans but also of technology.

According to a global survey of banking executives, 45% of those questioned said they want to transform their business models into “true digital ecosystems,” offering their products on other platforms.

One example of this trend is BBVA and Uber, which enabled a digital account linked to an international debit card in Mexico that became the bank’s first product operated from a third-party application.

At the same time, Uber drivers receive their payments within minutes, in addition to earning rewards for the purchase of fuel; this in turn spurs the use of the bank card in retail services.

The API economy has yet to reach its full potential. There are still many molds to break and alliances to create. With organizational will and state-of-the-art technology, banks can make new commercial allies that help them better serve consumers.

Andy Tran