In this post, Joshua Pulman shares 4 key trends Truist Ventures is watching in embedded finance. We explore how embedded finance will impact B2B software, commercial banks, value chains, and trust in financial services. We thank Ben Savage, Jose Bethancourt, Chris Tsai and Ross Diedrich for their contributions.
The opinions expressed in this blog are solely the authors' and do not reflect the views of Truist.
At Truist Ventures, we believe that embedding experiences that remove layers between services is a strategic imperative for financial and non-financial brands. Successful embedded experiences go far beyond just accessing new distribution channels, they genuinely enhance the product and customer journey. This trend, which blurs the lines between traditional banking and everyday activities, is poised to reshape not only the future of finance, but all our digital experiences.
Last quarter, we hosted a roundtable discussion with some of our ecosystem partners and portfolio companies to breakdown opportunities for embedded experiences to disrupt the traditional financial services value chain and better service customers at the point of need. The participants included Christina Russ (Head of Strategic Initiatives at Truist Ventures), Ben Savage (GP at Clocktower Ventures), Jose Bethancourt (CEO and Founder of Method), Chris Tsai (CEO and Founder of Resolve), and Ross Diedrich (CEO and Founder of Covered). Here are some key takeaways:
- B2B software is the next frontier for embedded finance and will grow alongside the adoption of vertical-specific operations and payment reconciliation platforms. Chris Tsai, highlighted the opportunity for B2B payment workflows to embed products like working capital loans and trade credit insurance. Suppliers offering flexible payment terms deal with chunky supply chain financing solutions and too often must line up factor financing to move their business forward. By embedding financial services directly in billing software, financial service providers leverage real-time data and connectivity to offer integrated solutions at the point of need.
- Commercial banks will win (and retain) relationships by enabling their clients’ tailored, seamless financial experiences. An easily accessible fintech stack has made it simple and very affordable for U.S. brands to embed lucrative financial services within their platforms. Ben Savage pointed out that 20 years ago it would have been prohibitively expensive for non-financial companies to integrate financial services, whereas now start-ups have created an easy fintech stack so platforms can embed many sophisticated financial experiences. (In some cases, so well that the financial services are almost invisible to the end user.) Companies offering competing B2B2C APIs to commercial clients will be measured by their integration capabilities, distribution channels and access to affordable capital.
- Start-ups and financial institutions create differentiated value through partnerships that marry innovative technology and access to capital, particularly in environments where capital is more expensive. Ross Diedrich, whose company launched successful embedded insurance products with Truist and McGriff, believes that being a great partner as an innovator requires patience and being a great institution partner requires speed. Institutions can invest in efficient vendor management and data readiness to prepare for innovation partners. According to Jose Bethancourt, incumbent institutions are getting more comfortable integrating new technology partners earlier in the origination and underwriting process. By doing so, Method can prevent modern fraud tactics and open up lender funnels to more borrowers that may not have been served otherwise.
- Financial institutions build trust by embedding digital services that go beyond banking. Integrating financial adjacent services in digital banking platforms can reduce layers in environments that customers already trust. This reversal of typical embedded finance models pushes institutions to go beyond banking with the help of innovative partners. One example is Codat (an indirect Truist Ventures portfolio companies), which enables businesses to connect their accounting and expense software to their commercial bank. Empowered with this data, commercial banks can embed forecasting tools and automated advisory to help businesses stay on track.
Embedded finance is rapidly changing how financial services are delivered and experienced. As this trend continues to evolve, partnerships between financial institutions and innovators will be key to providing integrated digital experiences that seamlessly meet customers' financial needs. Companies that embrace embedded finance thoughtfully - with a focus on trust, utility, and accessibility - will be best positioned to enhance client relationships and build loyalty. By combining domain expertise with an innovation mindset, providers can embed personalized financial tools in moments that matter and strengthen their role in customers' financial lives.
Ultimately, the future of finance belongs to those who can provide integrated services where, when and how customers need them most. Entrepreneurs and startups building innovative embedded finance solutions are encouraged to connect with Truist Ventures to explore partnership opportunities to shape the future of finance together.