There is no shortage of analysis of the various use cases that can provide payments, credit, and other services beyond the realm of traditional financial services. But perhaps what’s needed is more conversation about how everything needs to be delivered and what’s getting in the way of the consumer experience.
As part of our “What’s Next Payments” series on embedded finance, Thredd CEO Jim McCarthy told Karen Webster that the embedded options presented to consumers are often still difficult to use. They are off-target and not personalized. And in fact, it can feel more like spam flooding your inbox than a truly helpful financial tool that responds to consumers when they need it most.
“Context matters, and how you (as a company) fit into the context that you’re serving is really important,” he said.
He said the partnership has been successful and has seen Affirm and Peloton work together, with the former’s pay-as-you-go financing options offered at the time of purchase making the latter’s expensive exercise bikes more affordable. It is said that it became.
But problems arise when there are too many stutter steps in the process, such as confusion, credit checks, and data that consumers enter manually. The opportunity to close the sale is ultimately abandoned, or at best an alternative payment method is chosen. .
Mr. McCarthy sounded the alarm about the current state of embedded finance, saying, “Unfortunately, in some ways we are going backwards because of risk, fraud and regulation.” different regulatory regimes and obligations (such as the four-day waiting period for some transactions in the UK to review approved push payments, short-circuiting the ‘immediateness’ of payments); KYC and KYB checks, while well-intentioned, slow things down and make it difficult to deliver built-in experiences. McCarthy himself said that because he resides in Europe, his bank calls him to authenticate him during e-commerce transactions related to 3DS.
“Payment certainty has become payment uncertainty,” he told Webster. At our peril, we are taking a step back. ”
In an era of data breaches and credential theft, it’s not too far-fetched to think that consumers are wary of sharing their credentials unless it’s with a commerce ecosystem they trust. . Uber is the timeless example here, and so is Lyft, with access to earned wages, invisible payments, and other interactions firmly woven into the background.
Ecosystem benefits
McCarthy said embedded finance is a technology where payments are at the heart of commerce, and the data that flows between lenders, consumers, banks and others within these ecosystems helps inform sound risk management and underwriting decisions. He said they are best suited to thrive within defined ecosystems.
Which players get it right? Well, they go way back. In some cases, it goes back more than 10 years. While not necessarily a built-in financial player, Apple’s Apple Pay has proven to be beneficial here, and 10 years ago it was able to “break out of the queue” and earn the Apple Pay mark, allowing it to be placed next to items within e-commerce sites. Drop it into … it’s a one-click experience,” he said.
The good news is that technologies like pipes, digital wrappers, and rails are all there to deliver the magical experience that embedded finance promises.
More recently, McCarthy said, “It’s ecosystem players like Square that are leveraging end-to-end visibility across their platforms to create and cross-sell embedded products.”
Square sellers can receive loans based on their sales volume and their loan payment history (and past) extended by the platform, within the walls of the company’s ecosystem. “They get their paycheck and all of a sudden this magically turns into a loan,” McCarthy said, adding: “Square takes care of the payment flow behind the scenes… everything exists because money comes in and goes out.”
Broadly speaking, as long as the ecosystem can deliver the right product at the right time, with the right message, and based on a robust risk management model, repeat use is unlikely, he told Webster. , he said.
“The ecosystem has the ability to create amazing experiences like this,” he told Webster. And they do it all very well. ”
Learn more about: Apple Pay, e-commerce, embedded finance, embedded payments, featured news, jim mccarthy, news, partnerships, PYMNTS news, pymnts tv, security, square, technology, threads, videos, WhatsNextInPaymentsSeries, next steps in payments : Built-in all 2024
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