Editor’s note: Embedded finance, when done right, can be a game-changer. But if a finance function hasn’t addressed a clear friction point, pursuing embedded finance might prove futile. David Brady (pictured), Enterprise Sales Director, Southeast Asia, Airwallex shares how CFOs can create a successful embedded finance journey.
FutureCFO: What are the major challenges facing CFOs and the finance function in 2024 regarding payments and embedded finance?
David Brady (DB): The reluctance to invest in change and the difficulty of identifying a starting point persist. Trust in technology, especially in data privacy, AI, and cybersecurity, is growing, but greater adoption requires investment in understanding solutions like embedded finance.
Finance leaders must consider governance and control mechanisms to support and adapt to change.
Embedded finance, often touted as a buzzword, aims to enhance customer journeys and streamline business processes.
Done right, it can be a game-changer, and offer significant benefits, including additional revenue sources and time and cost savings. However, without addressing a clear friction point, pursuing embedded finance may prove futile.
Additionally, identifying a partner that aligns with their specific needs can be time-consuming and daunting, given the multitude of choices available. Every provider claims superiority in their products and solutions, making it critical for finance leaders to carefully assess compatibility with their organisation and team.
Another challenge is the cost and complexity of overhauling the infrastructure used by organisations to process their transactions.
This partly explains the slower pace of innovation in B2B payments compared to B2C. Nevertheless, as global trade continues to expand, businesses prioritise payment automation to better withstand today's volatile macroeconomic conditions and enhance long-term optimisation.
However, as the global economy becomes increasingly digital, the preference for integrated solutions grows, highlighting the expanding benefits of embedded finance. More companies across Southeast Asia are recognising the immense potential of integrating financial services into their offerings.
The opportunity for non-financial businesses to integrate low-cost, innovative financial services can significantly enhance the coherence, automation, and seamlessness of payment processes. Additionally, it enables businesses to explore new revenue streams.
While this requires upfront investment in both time and money, it is not as intimidating as it may seem.
Dig deep into the how and test with one problem with a sprint timeline.
FutureCFO: How should CFOs and the finance function address these challenges?
DB: Ultimately, finding the right partner to work with will be the most critical step.
We would encourage finance leaders to conduct their due diligence and identify a trusted provider that meets their needs.
This is especially important given the multitude of options, misinformation and confusion surrounding the capabilities and reliability of different providers. It may be more convenient to identify a single partner capable of providing an integrated offering, rather than engaging with multiple niche "best in class" vendors.
These providers typically maintain relationships with multiple banking partners and possess comprehensive financial infrastructure.
Platforms can leverage this existing infrastructure, enabling them to bring financial products to market within months with a significantly lower upfront investment compared to direct collaboration with a traditional financial institution.
Moreover, think big but start simple—go to any provider with a big vision, the best partners will be comprehensive in their analysis of your challenges and detailed in their presentation of a solution.
Dig deep into the how and test with one problem with a sprint timeline. Be open and flexible, real change is most effective and impactful when incremental and sustained.
More importantly, CFOs and finance teams should consider how they plan to utilise embedded finance once it's integrated. This would serve as a good starting point as they explore the embedded finance space.
Given the potential impact on the business, leaders from other divisions should also have the opportunity to provide input as finance leaders consider how their company can best leverage the potential of embedded finance.
FutureCFO: What emerging trend in payments should CFOs and the finance function take note of, and why?
DB: We should expect the embedded finance trend to continue into 2024.
In late 2023, we conducted a survey involving decision-makers in 1,000 Small and Medium Enterprises (SMEs) and found that businesses are generally less concerned about price and more concerned with efficiency and flexibility.
According to survey results, 83% said that they would be interested in accessing financial services through SaaS platforms and marketplaces, but only 9% currently do that. This is a clear indication that there is considerable appetite for embedded finance.
A more specific payment trend among finance leaders within platforms and marketplaces is the integration of payment acceptance into their systems, which is seen as a foundational step in providing embedded financial services.
This holds the potential to deliver substantial value to merchants on their platforms, as offering a convenient and compliant payment processing solution encourages them to remain with the platform, avoiding the inconvenience of switching providers.
Third, while not new, there continues to be increasing demand for instant payment settlements, with customers expecting almost instantaneous payment processing. Businesses that actively address this need for real-time payment solutions will gain a competitive edge.
Overall, there is a growing demand for more consolidated, convenient and streamlined payment experiences, highlighting the importance of embracing diverse payment preferences to cater to customer needs.
