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Did you know that a revolution is taking place right now in the financial world? It's called embedded finance. Welcome to CurrencyCast! My name is Agustin Mackinlay, I’m the Senior Financial Writer at Kantox. And your host. In this episode, we take a look at the embedded finance revolution that is quickly affecting many aspects of the financial landscape. As demand for embedded finance continues to grow in deposits, payments and lending,
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there's a largely untapped area that looks particularly promising, currency management. Let's look at that in more detail. Embedded finance is the placing of a financial product or service into a non-financial platform, It is quickly changing the global financial landscape. It stands at the crossroads of technology, business services and banking. Embedded finance allows any merchant or brand like Shopify to take a well-known example to manage and sell financial services smoothly, integrating payment, debit, credit insurance and other financial services into a non-financial platform.
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According to Bain Capital, financial products embedded into software platforms will exceed $7 trillion by 2026 in the United States alone. To boost revenues in the ultra-competitive and fast-growing embedded finance landscape, players need to extend their offerings beyond the usual payment and lending solutions. Here's where FX management can play a major role. Automated solutions now make it possible for banks, fintechs and payment companies to offer a wide range of international payments and currency management solutions.
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These solutions create new revenue streams as the underlying FX market spreads are shared amongst participants. These solutions also have embedded finance players to enhance their competitive position, while the big guys charge 3% plus conversion rates where technology makes it possible to both slash end users' hidden fees and boost vendor revenue.
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The barriers between traditional sectors of the economy are coming down. Instead, large platform companies together with smaller tech-savvy firms, including embedded finance players, are reorganizing traditional sectors of the economy into ecosystems by focusing like never before on technology-powered customers. Consider the free-flowing ecosystems and how currency management automation can play a major role. In the enterprise space by offering in-house FX to optimize currency management between headquarters and subsidiaries, including netting opportunities. In the travel space,
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by embedding SWIFT and SEPA international payments in dozens of currencies. And in the e-commerce space with buy now pay later solutions by guaranteeing FX rates during pre-determined time lapses. As more financial services are embedded into the world's leading ecosystems, a fintechisation of sorts is taking place right now and is taking place in the context of a largely multi-currency world.
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Surveys show time and again the extent to which end users value the possibility of making and receiving payments in their own preferred currency. So the conclusion is inescapable. There will be no embedded finance revolution without automated currency management. To us, that's a pretty exciting scenario.
