Embedded finance to hugely impact insurance customer experience

According to Ben Smith (pictured above), interim COO for Asia-Pacific at Railsbank, embedded finance is the seamless integration of financial services that have been incorporated into the customer brand journey, at the point they are needed.

“We are exposed to embedded finance experiences on a daily basis – through retailers or our rideshare providers, for example – and often we may not even realise it,” Smith said. “By giving customers an overall richer experience, embedded finance satisfies new-economy customer demands of better and more seamless digital experiences, while also empowering brands to integrate next-level finance capabilities.”

Smith said that embedded finance is evolving beyond basic banking, card or financial and insurance use cases. Moving forward, financial transactions will become more intertwined as part of a brand’s customer journey.

Smith said that consumers are increasingly desiring fully immersive, frictionless and personalised experiences with trusted companies, including their insurers.

“Because of this, we are seeing consumers demanding the same seamlessness when interacting with insurance companies as they get when they interact with a retail brand,” Smith said. “In some ways, many insurers are already moving down this road – consider how many insurers now provide digital and online tools and communication channels as compared to 10 years ago. Embedded finance experiences are a natural progression of this digitalisation process – it takes payments, the’traditional’ and most critical aspect of the customer and integrates it seamlessly into existing processes that are owned and managed by the provider.”

Smith said that embedded finance will have huge benefits for insurers because it will not only keep the process of paying for policies strictly within the purview of the business, but it will also give the insurers the opportunity to create brand-relevant, customised and hyper-targeted programmes to customers.

While technology investments in finance have grown massively, Smith believes that the insurance industry is lagging, with its focus on digitalising traditional rather than transforming the entire experience.

“The merging of embedded finance with the insurance process opens the door to a variety of innovative solutions that can be tweaked to become relevant regionally, locally, or even to very niche audiences,” Smith said. “As the potential of digital is truly realised in our day-to-day lives, there is an opportunity for insurance companies to create entirely new consumer experiences and business models, which in turn can lead to more revenue streams, better margins and better customer retention.”

A case study on embedded finance in insurance

Smith provided an example of Railsbank’s work with a digital native insurance and wealth management platform in Singapore that offers life, health, general, employee benefits insurance, as well as investment in mutual funds and unit trusts.

“Railsbank enables this platform to offer a deposit account and cards to customers,” Smith said. “As such, their users have the ability to manage and interact with the full product offering with ease from a mobile phone, underscoring the insurers’ bank-like capabilities. We enable this customer to build the next big financial services platform, by delivering a truly embedded, end-to-end, and seamless experience for both insurance and financial transactions – solving integration problems between the two functions. This seamless experience ultimately puts the power back into the hands of customers and shows how an embedded finance experience can help bring a vision of a new type of financial product to reality.”

Smith predicted that embedded finance will become even more widespread in a post-COVID world, given how the pandemic hugely changed how customers and insurers interact.

“By combining embedded finance experiences into one app with seamlessly integrated payments and the opportunity for fans to accrue loyalty points redeemable against exclusive experiences, this removes any friction points around access to financial services and payment while improving the loyalty strategy,” he said. “With a loyalty scheme built around an embedded finance experience, insurers can expand their loyalty schemes to encompass any purchase their customer makes, which means they can be part of their daily lives in a positive way while building a stronger relationship.”