We interact with innovative financial institutions (FIs) on a daily basis, examining and assessing the embedded finance model. At PortX, our experience in integrating enterprise resource planning (ERP) tools has led to several discussions with our customers about creating new business lines that allow FI services to be directly embedded into a corporate customer’s ERP system. In this blog, we highlight the transformative potential of embedding banking services directly into ERP systems and how FIs can capitalize on this opportunity to generate new business avenues, improve customer experience, and drive operational efficiencies.
How does embedded finance work in a traditional ERP system?
Historically, businesses have had to navigate separate online banking platforms to conduct financial transactions such as wire transfers, deposits, or credit line activations between themselves and B2B partners. This separation not only consumes valuable time but also introduces complexities in managing access controls and ensuring security.
The answer lies in embedding these banking functionalities directly into the company’s ERP system. Imagine the convenience where financial transactions become an integral part of the daily operational workflow for your corporate customers. This seamless integration ensures that tasks such as executing payments, viewing account balances, or initiating credit facilities are as straightforward as any other ERP function.
From a technical standpoint, embedded finance aligns closely with the concept of Banking-as-a-Service. At its core, it involves APIs that enable businesses to interact with banking services securely and efficiently. These APIs facilitate various functions, from checking balances to moving funds, all underpinned by robust security measures.
By way of example, our integration platform features a tailor-made connector for JD Edwards, one of the most prevalent ERP systems in use today. This custom connector facilitates a smooth integration of JD Edwards into our integration platform, thereby simplifying the process for FIs to embed financial products directly within the JD Edwards user interface for their customers. This streamlined integration capability enables financial institutions to offer their services within the familiar JD Edwards environment, enhancing user experience and accessibility with minimal effort.
The benefits of embedded finance in ERPs
Operational efficiency
One of the significant advantages of embedded finance is the operational efficiency that results. Businesses no longer need to switch between systems or manage multiple logins. This integration aligns with the natural flow of business processes, making financial management more intuitive and less prone to errors.
Security
Security is another critical benefit. By integrating banking services into ERP systems, companies can leverage their existing access control mechanisms. This approach ensures that financial operations adhere to the same rigorous security protocols applied across the business, significantly reducing the risk of unauthorized access.
Reduced costs
Overall, embedded finance solutions are proving to drive the growth of opportunities for FIs by opening new business channels for their financial products. According to McKinsey research, embedded finance contributes to reduced customer acquisition costs and increased conversion rates.1
Blending expertise in banking and enterprise integration
At PortX, we find ourselves at the forefront of this revolutionary trend. Our company has a unique expertise that stems from our background in enterprise integration. Although our primary focus now is on financial integration, we leverage this dual knowledge to bridge the gap between financial services and business operations.
As businesses seek more integrated, secure, and efficient ways to manage their finances, the need for embedded finance solutions becomes increasingly apparent. Our team, skilled in both banking API integrations and ERP systems, is perfectly positioned to lead this transition.
Looking ahead
While we continue to enhance our capabilities and adapt to the evolving requirements of embedded finance, we understand that the journey is just beginning. The integration of banking services into ERP systems represents a significant leap forward in how businesses manage their finances, offering unprecedented levels of efficiency, security, and convenience.
Integrating banking services into ERPs is more than just a technological advancement; it’s a strategic move towards smarter, more secure, and efficient financial management – creating new lines of business for FIs. If you’d like to dive deeper into this topic, start a conversation with our team today.
- https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/the-new-importance-of-partners-in-banking.
