Technology innovation isn’t just making embedded finance possible, it’s opening up new business channels.

Embedded finance — or financial services integrated into a variety of software and applications from non-banking digital providers — is made possible by application programmable interfaces (APIs), cloud computing, and the ubiquity of smartphones, agreed a panel of five banking and fintech leaders during Wednesday’s FTT Embedded Finance North America 2021, a virtual event exploring the future of the industry.

The API, which is the underlying technology, is more than just an integration tool or gateway that connects two pieces of software or data, suggested panelist Daniel Davis, director of product management at the $1.9 trillion Wells Fargo. Instead, APIs and the software developer kits (SDKs) that make them available are a new channel for reaching business users, he said.

“But now with APIs and SDKs, with low code and no code, all these things are coming together to make it really easy,” Davis said. “You’ve got the supply side, making it available to third parties making integrations easy, and the users accepting of it. So you bring all that together, and you really have this cool, I think, marketplace.”

That’s caught the attention of large financial institutions such as Wells Fargo, which now offers SDKs and API integrations, Davis added. Meanwhile, users have become more willing to authorize and share their data, leading to exponential growth in embedded financial services, he said.

Davis also pointed out that digital certificates and the Transport Layer Security (TLS) cryptographic communication protocol have made it easier and safer to share sensitive data, payment and credential information.

Adding artificial intelligence and machine learning tools on top of the API foundation also makes it possible to treat these APIs as new business models, he said.

“We have data from millions and billions of users and use cases and, and historical data; we can now say, ‘This will help you’ or ‘This is something you might be interested in that we never could access before,’” Davis said. “So if you put all that together, plus the cloud adoption, you really have amazing new opportunities that just couldn’t exist without those things.”

These technical tools have also made it easier for third parties to offer financial functions in their own software, essentially making it possible for every company to become a fintech, said panelist Sohaib Zahid, co-founder and CEO of Railz, which offers a real-time API connection to data from accounting software used by small- and mid-sized businesses.

“For us, embedded finance is really about enabling anybody who wants to build a financial services company on top of companies, like Railz or [integration API company Plaid], for example,” Zahid said.

Fintech partnerships are the way of the future for embedded finance, said Jayson Callies, chief information and innovation officer at the $691 million Seattle Bank. Callies sees opportunities on the commercial side, as well, with clients wanting to embed finance or digital wallets into their platforms. Payments will be a big driver for embedded finance, he predicted.

“Along those lines, I think the opportunities really down the road become more of an orchestration type layer,” Callies said. “You’re going to see all kinds of companies out there pulling fintechs, and payments, I think, is really one of the drivers of that — getting payments into the solution to provide a really good client experience.”

For Ami Iceman-Haueter, AVP of research and digital experience at $5.7 billion MSU Federal Credit Union, embedded finance is a means to meeting the CU’s customers — primarily university students — where they are.

“One of the biggest drivers, from our perspective, is meeting the expectations of our membership and what their control of their finances needs to look like on a personal level,” she said. “And having access to different APIs and embedded opportunities gives them more control.”

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