SEATTLE — Embedded finance, or the concept of payments and banking being appended to other consumer use cases, is quickly evolving beyond retail and e-commerce, industry executives said at the Bank Innovation Ignite forum in Seattle this week.
While automatic payments, alongside Uber rides or “walk in, walk out” cashierless checkout transactions, are often-cited examples of embedded finance, emerging use cases are likely to center around health care and other insurance transactions, practitioners explained.
“[The notion of] payments sitting in another app, we’ve been talking about for three, four, or five years — the examples of Mindbody, Uber — that’s just how the world operates now,” said Eric Byunn, co-founder of Centana Growth Partners.
Centana, a Palo Alto, Calif.-based growth equity firm that recently closed its second fintech fund valued at $375 million, is proactively looking to new areas where the concept will take shape, including insurance, health care and disbursements.
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“Insurance in particular is a piece that I think we see a lot [of room for innovation],” Byunn said. “It starts off with the way you buy an airplane ticket or rent a car; every time you reserve it, there’s travel insurance or loss-damage waiver.”
The financial implications of health care payments are a source of friction for consumers, noted Anu Shultes, CEO of LendUp. While some providers have added automatic payments, the inability to centralize payments in one place, and a lack of control over the transaction, are ongoing pain points for consumers, she noted.
“My health care provider has an app where I could set and forget [the payment],” Shultes said. “But you cannot know the complexities of a medical bill and it’s always a different amount each time, and so it’s not as simple as taking an Uber.”
Byunn and Shultes observed that while “set it and forget it” payments may work for consumers with predictable expense and transaction flows, consumers with unpredictable expenses or income volatility may face challenges when financial transactions take place automatically.
On loan underwriting, Shultes said an important use case is one in which the customer can gain access to credit while carrying out a different type of transaction. This approach requires partnerships with banks and other fintechs, but when carried out effectively, can help customers in need, she said.
“We give the example of the sort of insurance use case or when an underserved customer is somewhere else, like at a doctor’s office or looking for a tow truck. Can I embed underwriting into that experience, so they instantly know they have access to cash?” Shultes said. “That’s where I would love to see it go.”
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