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Embedded Finance: What Europe can learn from Asia’s finance lifestyle

Embedded Finance: What Europe can learn from Asia's finance lifestyle | Fintech Finance

Michael Lowers, Global Director, Finance Vertical Eco-development & Partnerships at Huawei Consumer Business Group, shares how different markets and consumer habits have moulded the growth of FinTech. He discusses how China and Europe have interpreted the potential of Embedded Finance, shedding light on some of the trends we can expect to see in the years ahead.

Consumer demand for convenience continues to grow

Consumer demand for convenience is growing; think quicker, better, and more trustworthy services. As a result, we’re seeing increased innovation across all industries, as businesses step up to offer their customers more competitive solutions.

The financial services sector is no exception. Across the globe, consumer expectations are growing, and with specific markets taking the lead, we can predict some of the changes that the industry can expect to see over the coming years.

Take Asia as an example: managing personal finances is beyond just an admin task to complete over the weekend, but a lifestyle that has shaped the way Asian consumers now live and plan. In Europe, compared with Asia aspects of Embedded Finance are still at an early stage, which has led to a slight delay in the progression of its digital financial offering.

Despite this, Europe has seen more exciting examples of innovative finance pop up recently. For instance, Klarna, a payment services company based in Sweden, giving their customers access to hundreds of retailers within one app, connected to their exciting Buy No Pay Later payment technology, to create a simplified search-and-pay service. Even PayPal, one of the first payment apps of its kind, continues to develop. It’s now integrating the buying, selling, and storing of crypto assets within a single platform.

Considering the slower development of FinTech in Europe, we can ask two questions: Why have other markets progressed so much quicker? And, looking at the cause of Europe’s recent progression compared to other markets, what predictions can we make for the future?

I recently joined a panel discussion at Copenhagen FinTech Week to talk about just that. Open and Embedded Finance is taking the world by storm, so it’s interesting to see how different markets are reacting to the potential they bring.

Embedded Finance: a cross-continental race? 

Looking specifically to China and Europe, many comparisons can be drawn. China’s technological development is fascinating – but why has it been able to bring new tools to the table so much quicker than the rest of the world? One of the main differences between Europe and China is that China has a much more open regulatory landscape. This means that FinTech and technology companies alike can bring innovative products to life much quicker.

The Chinese consumer has also played a fundamental role in the country’s progression. Being more open-minded to new technology compared to European consumers has led to faster ecosystem development as well. For a concept like Embedded Finance to succeed, you need customers to be willing to try something new for the sake of progression and convenience in the first place.

For example, in Europe, a big challenge for Embedded Finance lies in a willingness to get involved. It’s a new way of doing things. Embedded Finance involves partnerships between different organisations to provide a broader range of services. This would have a knock-on effect on traditional high street banks for example, and the roles these businesses have typically played in the past.  Banks may find themselves having fewer touchpoints with their customers compared to a pre- FinTech landscape. While this creates a new space for a better, more convenient user experience, it’s understandable why traditional banking groups may feel reluctant to innovate with partners for the time being.

Standardisation throws another spanner into the works for Europe. Open Banking is a good example as the APIs required as part of legislation can be interpreted and created in many ways – just as we’ve seen recently in the UK. The impact of this, however, means that banks are finding the process slow; it’s taking longer to leverage APIs and reap the benefits of Open Banking for both businesses and customers.

So, what’s next for Europe?

The opportunities for banks in Europe are almost endless. Thanks to Open Banking and Embedded Finance, organisations can begin innovating new services. Both technologies provide simpler and more convenient experiences for customers – they help banks to grow engagement and improve their customer retention in doing so.

China’s a great place to draw inspiration from. Plus, having already trialled a variety of services in the financial sector, there’s an opportunity for us to learn from China when applying those same technologies to Europe. Considering Huawei’s history in the Chinese market, we’re perfectly placed to help our partners with this, so that they can cut through to the best solutions for their users.  

Partnerships continue to show their worth when competing for innovation  

When industries develop, partnerships are the way forward. For traditional banks who need to access Open Banking and Embedded Finance technology, large technology companies like Huawei help to smooth out the process. At Huawei, we’ve partnered with an API service provider meaning we’re able to offer a shortcut to Open banking API’s for our app partners to help them grow.  

The great thing about partnerships is that businesses can work together rather than relying solely on their own resources, experience and knowledge. They mean that apps can include payment services from other specialists directly, such as international remittance from Wise, or BNPL services from Klarna.  

There’s an infinite number of partnerships to choose from, and experts in their own fields can even collaborate to offer even more services to consumers. Take Monzo, a popular and well-known FinTech app, where the team have chosen to partner with an external party to offer a wider variety of savings accounts for their customers.

At Huawei, we’re passionate about partnerships and the level of innovation that they enable. In the financial services industry, we’re always looking for new partners – whether that’s offering banks access to the vast knowledge, scale and technological capabilities that we have, or supporting smaller FinTech companies through API standardization.

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