“Reconstructing Financial Technology: Exploring the Value of Embedded Finance for Small and Medium Enterprises” is a significant research article from the Harvard Kennedy School. This article is very cutting-edge, breaking away from the traditional mindset of “selling bank products” and exploring how financial services can more precisely market and reach small and medium enterprise (SME) clients through an “embedded” approach.
Core Insights
1. The traditional marketing model of “waiting for banks to come to them” has failed for SMEs. 2. SME owners are very busy and have highly fragmented needs; financial institutions should no longer try to pull them into bank apps but should instead “embed” financial services into the software they use daily (such as accounting software, e-commerce platforms, payroll systems). 3. Future financial marketing is not about selling products but about selling “scenario solutions”.
Main Context
1. Marketing Pain Points: SMEs are the hardest nut to crack 1. High Heterogeneity: A construction company with an annual income of tens of millions and a café with only three employees are both called “SMEs”, but their needs are vastly different. Traditional “blanket advertising” is completely ineffective. 2. Data Blind Spots: Banks lack real operational data on SMEs (only annual reports), leading to reluctance in lending and marketing. 3. High Customer Acquisition Costs: The profit contribution from a single SME customer is far lower than that of large enterprises, but the maintenance costs are not low, making the traditional account manager model difficult to cover. 2. Solution: Embedded Finance 1. Definition: Integrating financial products (loans, payments, insurance) into non-financial companies’ platforms. 2. Old Model: Bank advertises -> Customer sees -> Customer goes to the bank to open an account -> Applies for a loan. 3. New Model: Customer needs money while purchasing on an e-commerce platform -> Checkout page directly shows “payment on credit” option -> Click to use. 4. Advantages: Appearing at the moment of highest customer need (Moment of Need) leads to the highest conversion rates. 3. A New Source of Trust: From “Interpersonal Relationships” to “Data Relationships” 1. In the past, SMEs trusted banks because of good relationships with account managers. 2. Now, SMEs trust platforms that understand their business (such as Shopify, QuickBooks). Banks need to collaborate with these platforms, using platform data to build trust and assess risk, thereby achieving precise marketing.
Key Quotes
“Small and medium enterprises are a challenging customer group that cannot be defined by a single metric like revenue.” “Embedded finance opens up the market by providing solutions at the time, place, and manner that small businesses need.” “Embedded finance offers a new way to reach customers without high customer acquisition costs.”
Summary and Marketing Insights
This article tells us that for financial marketing targeting SMEs, “channels” are “products”. You must turn your services into a “function” that is easily accessible in their daily business processes. Here are three practical suggestions for financial marketers: 1. Find a “Host”: What software do your target customers spend the most time on daily? (Is it inventory management systems? Industry SaaS? B2B procurement platforms?) Go talk to these platforms about collaboration. 2. Scenario-based Copywriting: Stop saying “we offer loans at a 5% interest rate”; instead, say “help you make this procurement order payment with one click, and pay it back next month.” 3. Simplify Processes: The core of embedded marketing is seamlessness. If clicking your ad requires filling out a 10-page form, the marketing will fail. Use data for pre-approval to achieve “click and get”.