Mastering the concepts every finance director should know
Understanding where banking and payments are heading helps finance leaders take the next step toward innovation with more confidence.
Looking at the present and future of finance, every responsible professional already knows we are going through the biggest shift in payment methods, and the biggest opening of banking, in history. Taking on new processes in this area is no longer a question of “if” but of “when” it will happen at your company. One thing is certain: the impact on finance leaders’ day-to-day work will be enormous, and the change, irreversible.
In this article, we explore paths that translate this innovation into practice and that forward-looking companies can adopt easily. These concepts are already being adopted by companies in Brazil and across Latin America, and they become more accessible to every kind of organization each day:
- Embedded Finance (EF)
- Banking as a Service (BaaS)
- Plug-and-Play Finance (PnPF)
- In-House Banking (IHB)
We explain the concepts in the first half of the text. In the second half, we want to dig a little deeper into how this is happening and describe how these concepts are applied inside companies.
Embedded Finance (EF)
Embedded Finance refers to a scenario where a non-financial service provider (such as a marketplace or a network) offers a financial product that is seamlessly built into its service offering.
Banking as a Service (BaaS)
Banking as a Service is a technology, backed by a license, that allows third-party companies to offer financial products. The company that provides it is usually called a BaaS provider. Behind much of the fintech wave, a BaaS provider must offer payment accounts to justify the name.
Plug-and-Play Finance (PnPF)
Similar to BaaS, Plug-and-Play Finance refers to third-party companies offering financial products. While the term BaaS is widely used in financial innovation, PnPF is still not as common. In fact, PnPF providers can be confused with BaaS, but the big difference between them is the ideal customer profile (ICP) and the way the product is built to meet its needs.
In-House Banking (IHB)
A fairly new concept of bringing finance inside the business, In-House Banking not only focuses on the service or product offered to customers, but also accelerates continuous innovation from the company’s financial core. It means building money movement services into the management of the business.
