Embedded finance experts at major banking groups BBVA and JP Morgan have said that it is still a huge untapped opportunity for the financial services market.

On Tuesday, speaking on a panel at Finovate Europe in London, Sadeque Ahmed, executive director, product management at JP Morgan said that there is “enormous opportunity” for integrating financial services into non-financial offerings.

“There’s huge potential that remains untapped,” he continued, adding that there are still challenges that the industry needs to overcome before embedded finance is fully exploited.

Ahmed said that areas such as onboarding and KYC, which have typically been seen as "behind the scenes", could also be productised and extended as part of the embedded finance value chain.

Jose Luis Navarro, head of Open Banking strategy at BBVA said that embedded finance presents a key opportunity for banks to access the open market.

He said that while it can cost banks a lot to attract a new customer through organic measures, recruiting new customers through a wider banner with a large, open market customer base is "cheap".

“All banks have to change from a threat to an opportunity mindset,” Navarro told the audience.

He explained that the bank’s experience with embedded finance has been different across the distinct regions it serves.

In Latin America, he said, it has been an "eye opener" because of the significant improvements it has made to day-to-day life for people living in remote areas. In Peru, customers living in secluded parts of the country are able to pay for utilities or other services in local convenience stores instead of having to travel further afield.

BBVA's experience on the retail side of the bank has also been different to that of the business side.

For example, it has been more complex to facilitate embedded lending for enterprises because it can be tricky to identify the decision-maker in the company that has requested the loan, explained Navarro.

When asked about how banks can make sure they don’t lose their relationship with customers in the journey to embedded finance, JP Morgan’s Sadeque Ahmed warned that if gaps persist for too long when it comes to engaging with customers or seeing market changes, then a source of info for developing products could be diluted.

However, he added that a happy medium is possible.

For example, Ahmed said that markets or segments where their presence is not as dominant, embedded finance with a third partner might work best.

“Balance risks whilst tapping into opportunities,” advised the exec.

Ahmed added that banks and other financial institutions should see the entrance of FinTechs and BigTechs as an opportunity to accelerate the transformation of their infrastructure and embrace modern technology.

"Sometimes we all need a push or kick and competition with players coming in with innovative solutions is a positive thing," he told the audience, adding that challenger banks in the UK have had a hugely positive influence on legacy players.

BBVA's Jose Luis Navarro said he'd like to see a level playing field that provides value for all parties.

"It has to be good for the partners and banks, and it has to bring value to the customer – whatever agreement we agree, that the end customer can find value – this will be the focus," he continued.

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