Why CIOs need embedded finance technology to modernize

As technology becomes increasingly important to the success of any business, CIOs face a new challenge to leverage tech and deliver winning business capabilities. Previously, digital transformation decisions often took a backseat to other business initiatives. However, the move from archaic systems to emerging technologies has become a requirement to survive the constantly changing environment. Navigating our new normal and maintaining a competitive edge now falls on CIOs’ shoulders. 

CIO priorities have been redefined due to recent market expansion, skyrocketing consumer expectations and behaviors, and disruptions to traditional business models. Currently, CIOs carry the burden of producing a significant impact within their organizations through digital transformation. The 2023 Gartner CIO and Technology Executive survey of over 2,000 CIOs in 81 countries and all major industries revealed that CIOs expect IT budgets to increase 5% on average this year. In an increasingly tech-driven business landscape, CIOs are expected to move beyond simply managing IT to leveraging technology to create value for the business. 

Unfortunately, many tech decisions don’t get sufficient business scrutiny beyond cost and high-level strategy discussions. Corporate leaders can struggle to see the measurable value of digital transformation as they don’t understand or believe that it positively impacts the bottom line. Without a strategic approach, unsuccessful transformations are expensive, time-consuming, and not worth the effort—only 31% succeed because most are not planned or executed without a realistic year-over-year transformation game plan. This is where CIOs can articulate to other C-suite executives how the business can best use technology to develop digital-enabled capabilities that generate revenue, improve profit margins, or advance the company’s mission.

As businesses become more strategic going into a new quarter, they’re looking for ways to optimize spending and drive agility and efficiency, whether it’s their tools, people, or procedures. A company’s investment in digital assets and business capabilities is expected to accelerate growth and even provide operational improvements in areas such as its financial processes.

With digital payment technology, CIOs can bridge the gap between digital transformation and the bottom line. This is one clear way to demonstrate the value of digital transformation for every organization because it clearly optimizes a business-critical process: payments.

CIOs Must Establish ROI

CEOs and stakeholders must support a digital transformation, meaning CIOs can not only explain but must also clarify how a change will drive business goals and unlock new opportunities. If the organization is not tech-focused and sells a physical product, then digital transformation may seem unnecessary—they need real-world examples of how it will improve work. The integration of financial technology or embedded finance, for example, should improve the buyer and seller experience by streamlining and offering multiple ways for consumers to engage with the brand in a modern context.

The banking system in the U.S. has been fairly closed for the past 40 years until the implementation of banking apps expanded its reach recently. Financial services have quickly evolved beyond simple point-to-point application integrations. Today, there are countless examples of embedded payments changing our expectations: Apple Pay enables you to make online or in-app purchases with the passcode on your phone; you can swiftly finance a purchase during the checkout process; and you can order a movie right from your TV without having to reach for your wallet. 

Now with the change to the banking system, payment services providers like Dwolla can offer innovators ways to access banking data and functions, making it easier for businesses to process more types of payments faster and with lower costs. For example, paper checks make the payment process and getting paid slower, and credit card payments garner a 2 to 4% transaction fee. In comparison, account-to-account (A2A) payments are processed in real-time and only cost 5 to 25 cents. This ensures that payments are actually processed effectively and accurately.

This is just one example of digital transformation that has real-world implications and affects everyday business processes. For CIOs to make a case for cross-departmental digital transformation, they must tie it to business functions with a clear impact.

Modernization Cannot Happen Without Integration

The demand for improved customer experiences and financial access pushes companies to fine-tune their offerings and modernize. Again, using the example of embedded finance, every system must be transformed to correspond with the digital age. Embedded finance already accounted for $2.6 trillion (~5%) of total US financial transactions in 2021, and by 2026 it will exceed $7 trillion (10%+) of total US transaction value. This is just one example of a way that companies can and should embrace digital transformation so that they can keep up with their competitors.

With modern payments technology, your business can cater to customers through configurable API implementations and scalable infrastructure, allowing them to purchase from your brand in a way that makes sense for them. CIOs know it is more difficult to digitally transform large enterprise-sized organizations, so they must slowly innovate and embed new technology on a granular level. Payment platforms like Dwolla offer features to amplify the full range of advantages of using a payment solution:

• Bank verification: verify a bank account to help mitigate the risks of ACH returns and potential fraudsters.
• Transfer limits: increase your transaction limits to fit your business needs.
• Money movement: enable multiple A2A payment methods–ACH, RTP, FedNow, etc.
• Funds flows: accept different types of payments, facilitate payments between users, as well as payout in different payment methods.
• Addenda records: add payment-related details to an ACH transfer with specific, customizable transaction information.

Embeddable payment processing allows companies to connect securely to other critical business partners, like banks. According to Finastra’s Financial Services State of the Nation Survey 2022, 99% of respondents consider open banking and open finance a “must-have” or “important” for business success. The research was amongst 758 professionals at financial institutions and banks across France, Germany, Hong Kong, Singapore, the UAE, the UK, and the US, revealing finance’s universal place in creating more innovative business models. “Embedding” banking functions into a company’s operations benefit the non-banking institution and the financial institutions it connects to.

There is no question surrounding the necessity of digital transformation across organizations, but the finance function is a critical area that cannot be left behind. As technology is always evolving, becoming digital is not an end game but an ongoing, incremental continuous improvement program. Organizations that don’t refine and transform their processes won’t keep up in this competitive environment and will suffer in their respective markets.