The role of Big Data in delivering Embedded Finance

As with everything in the information era, the all-powerful, all-consuming Big Data behemoth plays a crucial role in embedded finance. In this third blog in our embedded finance series, we explore just how much Big Data is set to shape the next stage in the evolution of this area of fintech.

Using cookies to buy cookies

For many people, the most obvious first signs of the power of cookies (not the tasty ones, but arguably the equally unhealthy ones) was seeing Facebook ads crop up in your feed, harnessing the power of Big Data to match your interests and browsing behaviour with relevant adverts and offers. Fast forward a decade and a half, and these adverts are omnipresent, from the unskippable 10-second ads on YouTube (has anyone ever paid for YouTube premium?) to the cookie-adverts that seem to follow you on every website you visit.

In the embedded finance world, companies are now starting to leverage Big Data to promote extra products or services that are related to their primary product. But this already goes far beyond embedding cookies on websites and social channels. Businesses of all kinds now recognise that data is one of the key components in being able to deliver an optimal embedded experience for their customers.  

Building a powerful picture

Embedded Finance is now something that extends into all kinds of realms, but the secret to its success lies in offering customers exactly the right product at just the right time, in a way that makes it easy for them to take up.

To build this kind of experience, it’s vital to understand customer behaviour and match it to buyer intent and need. This includes trying to ‘read’ or anticipate those key life moments or journeys that customers might have. It’s no mean feat to achieve this, but the ability to piece together a thorough picture of each customer can be powerful in enabling businesses to provide these timely and highly personalised products and services. It’s something that can potentially drive instant take-up and, with it, a ‘stickier’, more invested customer. 

One embedded finance example with huge potential to unlock via using Big Data is embedded insurance. Finextra gives the example of a car insurance provider, who will offer products to a potential customer by analysing the information gathered from data farmers and/or other sources – and this will be intertwined with the unleashing of artificial intelligence capabilities. With businesses looking to provide optimised embedded finance products and services to customers, AI can analyse the right data – and it will also produce an offering that would match the client’s needs.

But embedded insurance doesn’t just stop there. From phones to cars, watches to fridges, doorbells to security systems, large swathes of our daily lives are often connected and ‘always on’. If you were to drop your phone, scrape your smartwatch, or be involved in a car accident, it’s distinctly possible that an automated insurance claim could not only be submitted, but approved, based purely on the sensors on the devices – saving the user the time and the hassle of having to do it themselves. That will be music to the ears of millennials and Gen Z, who are more demanding of frictionless payments and a smoother customer journey, as Tribe has previously discussed.

Joining the dots

Sharing data across organisations to make it truly ‘Big’ will be an invaluable step for those businesses who can engineer it – imagine being able to join up all the financial elements of a life changing journey such as buying a house – the deposit, mortgage, insurance and even credit for buying new furniture and offer a seamless experience that gives home buyers easy access to relevant offers and applications for all these products in one single platform. 

But sharing data is always a tricky subject – and data protection has never been more important or more of a concern for consumers than it is now. However, provided the right consents and conditions are in place, (which will undoubtedly require significant customer education and watertight data security) the possibilities are endless. We’re already starting to see challenger banks and digital-first fintechs offering customers both education and incentives to share their data in order to benefit from more personalised experiences.

This is also where Open Banking can really move the dial. PSD2 has given a framework for businesses in Europe to open up access to data to deliver more innovative services to customers. That's why it's such a pivotal moment for embedded finance, because the structures to access data from other businesses are now there. 

Of course, there’s still a lot more work to do to realise the potential of Big Data in embedded finance, but we’re excited about the road ahead and where it will take us.

When it comes to Tribe and Open Banking, we can collect data from across European Banking Institutions to provide additional services and draw insights (AIS functionality), and embed the management of adding banking funds to your issuing programme with the fully connected function from your app (PIS functionality) - all without the need for a licence.