Embedded finance has various key advantages for organizations, such as providing an alternate source of revenue, trustworthiness and competitive advantage.
FREMONT, CA: In embedded finance or embedded banking, financial services are seamlessly integrated into a traditionally non-financial platform. Financial services can be accessed within the app and in context. A ride-hailing app, for example, allows customers to make cashless payments. MSME, B2C, and B2B businesses can leverage embedded finance to increase their customer lifetime value and monetize their customer base. The market is potentially worth over 7 trillion dollars, and it has been dubbed the fourth platform by Bain Capital.
Embedded finance companies are increasingly collaborating with businesses to offer financial services. A few major manifestations of embedded finance are as follows:
Payments embedded in software: The term embedded payments refers to the integration of payment infrastructure within an application or platform to create a seamless payment flow. The first financial service integrated into a non-financial product experience was payments. With end customers using these features intuitively on a regular basis, they have become an essential part of any E-Commerce app or SaaS platform.
E-wallet integration into e-commerce apps, payments through educational establishments' ERPs, subscription-based payments for SaaS, and more are just some of the rich use cases embedded in embedded payments.
Credit embedded in the system: The term embedded credit refers to the integration of credit products into non-financial digital platforms. The platform allows consumers to apply for, acquire, and repay loans.
Insurance embedded in the system: Embedded insurance refers to the bundling of insurance into the purchase of a product or service. Insurance-embedded companies offer APIs and technologies for integrating insurance solutions with mobile apps, websites, and other partner ecosystems.
Embedded finance's impact is as follows:
Distribution of financial services will be dominated by digital platforms: With digital platforms, customers are better served than ever before. Digital platforms are now expected to fulfill customers' needs more deeply. They can play a significant role in the distribution of financial services because they have a deep understanding of customers.
Tech companies will partner with banks: Financial institutions can leverage their vast amounts of consumer data by partnering with digital platforms. With this data, banks can acquire new customers, understand their existing customers better, and tailor financial products accordingly.
Innovative financial products will be driven by data: Through the use of data, banks can tailor their financial products to meet the needs of their customers. Data from the platform will enable advanced underwriting and help them to approve customers more quickly. A new generation of innovative financial products will result from this.
Financial services will be more user-friendly for consumers: Customers are now spoilt for choice as embedded finance companies emerge, and the most-loved brands now offer financial services. Services are getting better, and accessibility is only going to improve.
