Embedded finance is flexible and universal, which makes it suitable for businesses and industries with transactional components. The technology has the potential to revolutionize payments and expand financial innovation.
FREMONT, CA: In recent years, embedded finance has significantly reduced barriers to entry for various products and services. This has already started streamlining financial processes in consumer and business commerce and banking. The process of getting a loan for purchase used to require a consumer to visit a bank for a loan physically. In the same way, a business buyer would spend hours completing cumbersome paperwork to obtain trade credit. These services are now easily accessible at the point of sale.
Embedded finance is expected to exceed $7 trillion in value in the next ten years, making it worth twice as much as the top 30 banks in the world.
This is an actionable market opportunity in a highly competitive space.
Many start-ups are providing businesses with embedded services, including buy now, pay later (BNPL) and trade credit insurance, a buzzphrase in consumer financing recently.
Embedded finance is one of the most developed areas of technology today. Let us know a few examples of embedded finance.
Embedded payments: With embedded payments, consumers and businesses can make instant payments at the touch of a button.
A great example of this is when payment technology is integrated into an app or e-commerce website, eliminating the need for buyers to enter their credit card information every time. The embedded payment feature of rideshare apps eliminates the need for customers to pull out their credit cards or find cash. The app allows them to pay automatically after their ride is complete.
The emergence of digital wallets enabling contactless mobile payments and instant online purchases is another form of embedding payments that has become massively popular since Apple Pay was introduced.
Embedded lending: Essentially, it allows buyers to access deferred payment facilities at the point of sale without going to a bank or other lender through an integrated credit or financing product of a non-financial services company, such as a retailer or marketplace.
Consumer-focused embeddable lending, commonly known as BNPL, is well-known and popular within embedded finance. Businesses can now access an improved digital version of traditional trade credit without dealing with cumbersome paperwork or waiting for long approval through the B2B BNPL market.
Embedded insurance: Previously, a buyer looking to insure a new purchase would devote time, money, and effort to researching and buying the best insurance product they could find. That's after they'd already spent time, money, and effort researching and purchasing the product.
Insurers can now easily find and add insurance products to purchase with a single click, negating the need to contact brokers or agents. This negates the need to shop around for the best deal. Travel insurance is an example of embedded insurance since we're offered it every time we buy a flight or train ticket.
The flexibility and universality of embedded finance make it suitable for use in any company or industry with a transactional component. It also has the potential to revolutionize payments and expand the horizons of innovation in the financial services sector. Embedded finance offers a world of possibilities that even incumbent players have begun to discover.
