The era of invisible banking
With consumer convenience at the forefront, frictionless payment solutions continue to dominate
Imagine a world where payments happen effortlessly without a second thought.
The era of physical branches and dedicated banking platforms is gradually fading, paving the way for more seamless, integrated systems that can operate in the background without requiring conscious effort from users.
As technological disruptions redefine how industries operate, the banking sector has incorporated technologies to accomplish its goal of a cashless society – an aspect significantly influencing corporations and consumers alike.
Banks and fintechs are racing to embed instant, connected payments into everyday activities, ushering in the age of invisible banking – where transactions occur with just a swipe of a phone or a touch.
Over the years, this way of banking has emerged to make financial transactions unobtrusive.
This shift promises to change how we perceive and interact with financial services, making them invisible yet integral to our daily lives.
The idea opens the possibility of incorporating payment systems so deeply into everyday activities that they become nearly imperceptible.
At the core of this banking revolution are application programming interfaces (APIs) and the concept of embedded finance. These technologies allow financial services to be integrated into non-financial platforms, helping simplify and enhance user experiences.
By acting as intermediaries, APIs facilitate the exchange of data and execution of transactions in real time, inserting banking services into various platforms and applications.
APIs serve as powerful tools for differentiation, helping banks diversify their offerings, tap into new revenue streams, and deliver enhanced customer experiences.
According to a study by McKinsey, several large banks are launching API programmes and allocating, on average, about 14% of their IT budget to APIs.
This significant investment underscores the strategic importance of the interface in modern banking.
For instance, Mashreq has launched an API-enabled real-time payment service for its corporate and institutional clients, facilitating domestic fund transfers, account-to-account transfers and bulk transfers.
Across day-to-day activities, APIs are transforming how financial services are delivered and consumed. For example, PayPal’s APIs facilitate online payments, allowing users to pay for goods and services directly through various e-commerce platforms without re-entering payment details. US cloud communication company Twilio’s APIs offer seamless integration with WhatsApp, enabling businesses to reach customers at scale with personalised engagement solutions.
Twilio’s software supports one-way alerts, promotional messages and conversational customer care. It provides secure account verification and targeted communications across multiple channels, enhancing customer trust and engagement.
Several other financial institutions offer open banking APIs that allow third-party developers to access account information and initiate payments. This gives consumers greater control over their financial data and provides access to innovative third-party services.
Moreover, it encourages innovation and leads to the development of new financial products and services.
This approach allows businesses to rapidly incorporate lending, payment processing, insurance and investment services into their existing platforms, significantly amplifying their transformative potential.
As a result, financial transactions become an effortless part of everyday activities, driving efficiency and innovation across various industries.
Deloitte projects that the market for embedded finance is expected to grow to $7.2tn by 2030.
Globally, apps such as WeChat and Alipay in China, as well as Grab in Southeast Asia, exemplify embedded finance. These apps integrate services like shopping, transportation, and social networking with financial features, allowing users to manage everything in one place.
For Middle East’s food delivery app Noon, the embedded financing module allows payments to be made directly within the site or page, without redirecting to third-party resources.
Similarly, Careem offers integrated payment solutions and digital wallets, enabling users to pay for rides, food delivery, and access other financial services seamlessly. These interfaces across digital platforms also open myriad possibilities for corporations, reducing the need for customers to navigate multiple platforms for financial transactions.
Invisible banking has been a game-changer for the retail industry, particularly with the implementation of payment solutions within shopping apps and websites.
Companies such as Amazon and Walmart have incorporated services that allow for seamless checkouts, instant credit at the point of sale and even instalment payment options.
The technology sector, particularly within software as a service (SaaS) companies, has also embraced this transformative potential with platforms such as PayTabs and Telr in the Middle East integrating financial services to support e-commerce businesses with payment processing, fraud detection and automated billing.
Looking ahead, the future of invisible banking promises even more innovation and integration.
Emerging technologies such as blockchain, robotic process automation (RPA) and artificial intelligence (AI) will play pivotal roles.
Blockchain, with its decentralised and secure nature, can enhance the transparency and security of financial transactions. RPA can automate repetitive tasks, reducing operational costs and increasing efficiency, whereas AI will enable banks to gain deeper insights into customer behaviour and preferences, allowing for highly personalised financial services.
As these technologies continue to evolve, they will further revolutionise the banking sector, making financial services more accessible, efficient and tailored to individual needs.
