Invisible banking: Invisible finances are more than a ‘futuristic’ trend

Imagine the possibility of making financial transactions and decisions about money in an organic manner, without the need to actively look for resources, tools, and information in order to take action. Now, that possibility is a trend that has been getting more and more adopters by the day. We’re talking about invisible banking.

The idea of invisible banking services using resources such as IoT and Artificial Intelligence might sound a little futuristic, but the truth is that they are already part of a lot of the solutions available to users nowadays—and they’re quickly becoming a reality in the payment and banking industry. Would you like to learn more? In this article, we’ll walk through the definition, advantages and examples of this concept. Check it out!

What is invisible banking anyway?

Invisible banking basically means using financial services through existing resources and tools incorporated in our daily lives, almost going unnoticed. In order to achieve that, they use Artificial Intelligence, voice interface, 5G networks and ‘Internet of Things’ (IoT) resources.

Data collected through those tools help anticipate needs that may arise from the user’s journey—for instance, the possibility of contracting a travel insurance when geolocation data show that the user is in a different location or offering a loan with competitive conditions in case a purchase costs more than the amount of money available in the customer’s checking account.

All those processes happen in a seemingly organic manner, so the user doesn’t need to open the bank app and look for a specific service.

Also, invisible banking solutions are ubiquitous in services at companies indirectly operating in the financial industry, such as transportation and delivery services, which are already part of our daily lives and have aggregated functions related to payments.

In other words, the invisible banking is directly connected with the phenomenon of embedded finance, or “embedded finance”, in addition to being based on the innovations brought by the logic of the banking as a service (BaaS). In this process, everyone wins: the customer has less friction in their transactions, and issuers can incorporate an even wider range of products and services to be contracted in a single action.

Invisible banking is the way to go for more organic transactions

the invisible banking, as we say, is the result of the connection of several innovative technologies developed recently and driven mainly by the need and convenience of carrying out contactless transactions or displacement (a transformation that was accelerated by the covid-XNUMX pandemic). Thus, it is easy to see why it is pointed out as one of the most promising trends in the payments market and banking.

The main revolution in this movement is embedding financial services to other apps. And it is worth drawing a distinction: Embedding is different than hiding! It is actually such an organic integration between payment institutions and services provided in various platforms that it seems like the transaction is conducted by the service provider, instead of the bank.

That is the main reason why we state that invisible banking offers frictionless transactions with an improved customer experience, as well as expanded opportunities for payment institutions and other types of business where finances can be embedded in existing operations.

Invisible banking: Customization and relevance

The most relevant key words to understand the excitement around invisible banking resources are ‘customization’ and ‘relevance’.

Both of them refer to the use of data collected on all websites and apps we use every day: The fact that banks, fintechs and companies share information of their users results in customized offerings that meet various needs and conditions.

However, the companies’ access to that information of their consumers ends up creating a lot of resistance in users—after all, it is actually odd that financial institutions are such a big part of our everyday lives that they become ‘invisible’ while knowing so much about us. And that’s where relevance comes along to relieve that discomfort: That is the factor working on improving the customer experience so that the result is exactly what the consumer expects.

The more the users leverage those services, the more information is available to banks and fintechs, and the more they are able to reduce friction in daily transactions and customize the experience in order to engage the customer.

In this sense, personalization also appears as an important direction for building brand value and competitiveness in the payments market. Something that will evolve even more with the implementation of the Open Finance, which will allow the sharing of consumer information by financial and non-financial service providers through APIs. Thus, it is predicted that users will be able to use a single interface to access products and services from a multitude of players — which will undoubtedly move the entire market!

Four trends in invisible banking

It is clear that invisible banking has come to stay, so now the point is where to find it. The answer is: Everywhere! Or at least that is what American Banker expects, listing four top trends of the phenomenon that have already started impacting the payment industry, while also causing with an accelerated demand for technologies supporting the potential volume of transactions for players in the area:

Internet of Things

With the gradual replacement of cards and cell phones by wearables and biometrics resources, payments are expected to become even more organic, using facial recognition or simple taps on smartwhatches. The projection is that, by XNUMX, the number of equipment connected to the internet will triple, surpassing XNUMX billion in the coming years and moving a trillion-dollar market.

The trend is that we’ll come across more and more ‘smart’ methods accepting payments in a standalone manner, without any user command—in cars, for instance, the driver can pay for filling up the tank as soon as the they leave the gas station’s perimeter.

Voice banking

If it is already common to start off our day by asking Siri or Alexa whether it will rain, we’ll soon ask our virtual assistants to keep our bills in order, make loans and make other transactions simply by using our voice. The trend is that different operation systems will become interchangeable, by working on an open-source basis integrated with IoT.

Financial health

Personal financial management resources will also be onboard in the near future. That’s because the easy way to make transactions with smart equipment and platforms and integrated apps can cause users to spend money more quickly, if there aren’t mechanisms in place for getting financial information that are streamlined as well as quick.

To that end, apps leverage their visual features such as graphics, color coding, and alert notifications so that it is easy to track where and how most of each user’s money is spent. It is not a matter of using categories, as it already happens in many online banking platforms—it is actually about introducing fully customizable tools in order to change habits.

For instance: a user indicates they intend to take a trip at the end of the year, and the bank automatically transfers money from the user’s checking account to a savings account exclusively dedicated to that end, by taking into consideration the consumer’s patterns in spendings and average income.

Another example of that trend in invisible banking: Based on the information about how the user organizes their debt, the bank suggests the best choice at the moment of purchase, whether recommending the best payment method or the number of installments that is the best fit for the consumer’s budget.

Banking as a service, APIs and partnerships with fintechs

While banks in the past were the only ones providing financial solutions, today the industry is much more dynamic and open to different players stepping in—including in collaboration with traditional institutions.

From a technological point of view, this is possible thanks to the “as a service” models and the so-called API Economy , engines that accelerate transformation by facilitating the development of financial services through modular platforms.

See also: Embedded Finance – Transforming Business and People's Lives

Dock: We decode the infrastructure behind invisible banking

Throughout our history, we have evolved to become the only platform that offers solutions for the entire payments ecosystem and banking. Through our pillars of Banking, Issuance and Processing of Cards and Acquiring, we have allowed companies from different segments to participate in the payments market and banking and can unlock the potential of your business.

Thus, we’re also creating conditions so that our customers are able to take part in transformations related to invisible banking!

Summary: invisible banking

• Invisible banking is one the most promising phenomena among those transforming the payment and banking industry, by enabling financial services to be contracted in a manner that is more and more organic and ‘invisible’;
• The progress in invisible banking is driven by advances in technologies such as the Internet of Things (IoT), Artificial Intelligence, and 5G; as well as transformations in user behavior, which demand solutions that are more streamlined and incorporated in our daily lives;
• The Embedded Finance phenomenon is correlated to the advance in invisible banking, since it enables companies from different industries—such as delivery apps—to embed finances in existing solutions

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