Mid-sized banks have a big opportunity to maximize revenue potential and improve client experiences by transitioning to embedded banking, and to realize the full benefits of this transition, they need to leverage virtual ledgers, a report by tech payments company Finzly and Datos found.
The Finzly and Datos report, shared with CI, examine the embedded banking opportunity for mid-sized banks through virtual ledgers.
Finzly, a payment and financial solutions, partnered with Datos Insights on a report published that found midsize banks “have a big opportunity to maximize revenue potential, improve client experiences and enhance their competitive positioning by transitioning to embedded banking.”
To realize the full benefits of this transition, banks must “leverage virtual ledgers which bridge ledgers from financial institutions with those of fintech vendors for immediate and transparent reporting.”
When traditional banks, especially mid-sized ones, transition into embedded banking they often experience “challenges in accounting and ledger management primarily because their rigid systems aren’t designed for the flexibility and scalability required by modern fintech and enterprise solutions.”
To address this challenge, banks can “rely on new technology to bridge the gap, offering a versatile and efficient accounting structure that seamlessly enables transactions across various payment rails, including FedNow, RTP, ACH, Fedwire and Swift.”
Booshan Rengachari, Founder and CEO of Finzly, said:
“In today’s fast changing financial environment it’s imperative for banks to adopt virtual ledgers to enhance services for their fintech customers. Mid-sized banks have a big opportunity to integrate virtual ledgers into corporate clients’ systems via APIs helping reduce costs and resolve some of their biggest complexities.”
The Datos report outlines how virtual ledgers “can help mid-sized banks maximize their revenue potential” through 3 main business scenarios:
- BaaS: they can use virtual ledgers to synchronize their accounting structures with their BaaS fintech partners enabling transactions across various payment rails and across different currencies and asset types
- Corporate onboarding: mid-sized banks can better compete with larger institutions by offering virtual account setup services for enterprises. Equipped with APIs, virtual ledgers have strong potential to provide embedded banking experiences by integrating them into their clients’ ERP systems and AR/AP ledgers
- Shadow accounts: virtual ledgers can resolve downtime of core banking systems by ingesting all transactional data, processing it, and then passing it to the core system for final posting when the core is back to work. This maintains continuity of service for instant payments.
Finzly recently launched Account Galaxy, its embedded banking solution “designed to allow banks of all sizes to participate in the embedded banking sector.”
Through a sidecar core, Account Galaxy “allows non-banks and fintechs to create virtual accounts with real-time transaction monitoring, thereby reducing compliance risks and enhancing speed.”
