Innovative financial solutions require a strong data infrastructure

June 14, 2023

No matter whether it comes down to online shops, news websites or streaming services – in a digitalised world, companies want to seamlessly integrate financial services with such non-financial platforms. From compliance issues to the promotion of financial inclusion – which is a new buzzword – everything has to be thought through. But how can this be successfully implemented? Namely, by providing secure, user-friendly financial services that are accessible to everyone, such as those being developed at FAME. The Gaia-X infrastructure plays a crucial role in this process.

By Ralf Schädel, IT Editor and Project Manager Cloud Services and Gaia-X at eco – Association of the Internet Industry.

In everyday life, users are increasingly encountering the term “embedded finance” (EmFi). But what does this actually stand for? It refers to the integration of financial services into platforms and applications that are commonly used and non-financial. EmFi enables users to seamlessly integrate financial transactions and services into everyday activities, without having to rely on separate financial institutions or applications. To take one example: online shopping. Here, customers can make payments directly through the e-commerce platform or apply for loans to buy a car through a trading platform. This simplifies and speeds up the entire financial process. Embedded finance is growing in importance, given that it makes financial services more convenient, accessible and customised. It opens up new opportunities for innovative financial products and services that are equally accessible to all in terms of financial inclusion – regardless of income or social status.

Focus on accessibility and convenience

Although this development offers great advantages to both users and companies and will become increasingly important in the coming years, there are still a few stumbling blocks to be ironed out in order to tap into the full potential. This is exactly where the project “Federated Decentralised Trusted Data Marketplace for Embedded Finance”, or FAME for short, comes in. The joint project involves more than 30 partners and world-leading experts in data management, data technology, the data industry and digital finance from 15 EU countries. The goal: Seven pilot projects in different countries are to make financial services accessible to a broader population.
The goal of the first dedicated marketplace in Europe is to make the relevant EmFi capable of being integrated and validated. The marketplace is designed to be not only federated, decentralised and trustworthy, but also energy efficient. By integrating financial services into existing platforms – such as e-commerce websites, social media or mobile apps – consumers can conveniently access financial products such as payments, loans, insurance and investments. With improved streams of financing, companies receiving public support can minimise many of the risks they face when providing guarantees, securities, co-financing or pre-financing as a condition of receiving funds.

Preventing abuse

FAME places great emphasis on security and data protection to minimise risks such as fraud, data leakage and abuse during the integration of financial services into non-financial platforms. At the same time, the project strives to comply with regulatory requirements to ensure interoperability and legal compliance – ideally without restricting innovation. User trust and acceptance are of great importance, which is why FAME focuses on transparency, data protection and an improved user experience (UX). Technological complexity is also minimised: established technical standards and interfaces allow for a smooth integration of EmFi applications and facilitate the development of new, innovative solutions.

Strengthening data infrastructure and digital sovereignty

Gaia-X also has ambitious goals: the project aims to strengthen the European data infrastructure and promote digital sovereignty. Gaia-X is founded on the idea of a federated data platform built on common values and standards in terms of security, data protection, interoperability and transparency. In short, it aims to provide companies with the tools to build trusted digital ecosystems in which they can share their data securely and efficiently. This also aims to reduce dependence on global tech giants and to enable the companies to regain control over their own data. Gaia-X aims to support the European economy, promote innovation and improve the global competitiveness of European companies.

Matching goals and values

Security, interoperability, the fostering of innovation and new business models, not to mention the recognition that value-creating data usage requires a relevant infrastructure – these are clear common features of FAME and Gaia-X. In FAME, the integration of financial services into non-financial platforms is accomplished through the access and use of data. The platform enables users to access a wide range of financial data and apply it for their needs, which supports the development of new financial products and services. By using data as the bedrock of their activities, both FAME and Gaia-X help to harness data potential and to create value.

While FAME and Gaia-X share similar goals, they also have some distinctions: While Gaia-X, for example, aims at broad applicability in different industries, FAME focuses on the integration of financial services into non-financial platforms.

Overcoming distinctions and leveraging synergies

Despite different focal points, there are also common features that would make cooperation attractive. Both Gaia-X and FAME want to put data control in the hands of users and enable them to use their data in a secure and trustworthy manner. If FAME’s EmFi applications are integrated into the Gaia-X infrastructure, this will not only promote financial participation within Europe: FAME will also gain access to a wide range of data sources via Gaia-X, which could serve as the basis for developing new financial services and data-driven solutions. In addition, FAME can benefit from the broad data infrastructure and trust that Gaia-X has already constructed. Gaia-X, in turn, could benefit from FAME’s innovative financial services to further strengthen its user ecosystem and develop new applications. In addition, the collaboration with Gaia-X would underpin the depth and breadth of its use case horizons.

By combining security standards, data protection practices and technological expertise, Gaia-X and FAME could create a new ecosystem that enables companies to monetise their data and gain a competitive advantage. Close cooperation would strengthen digital sovereignty, improve the user experience and make European companies more competitive. Overall, a collaboration between Gaia-X and FAME could make a major contribution to shaping the future of financial services in Europe.