Embedded finance: Uncover the benefits of offering embedded finance solutions

Embedded finance is revolutionizing the way people use financial services while simultaneously bringing tech companies increasingly into the financial sphere. The combination of developing technology and increasing demand has driven tech companies to develop the kinds of financial services that their users have been asking for. This can be especially useful for smaller enterprises, specifically as embedded payments are paving the way for a more complete suite of financial services.

What is embedded finance?

Embedded finance is the integration of financial tools or services – such as lending or payment processing – into the infrastructures of non-financial businesses. It is designed and used to provide a more streamlined financial journey for consumers, increasing the ease of access to the services they need at the relevant points of the process.

Which financial services can be embedded?

There is a range of embedded financial services that can be utilized by businesses. Below are some examples of embedded finance.

Embedded payments

Understanding what embedded payments are is crucial. These allow businesses to simplify the payment ecosystem and keep everything in house. They can be used to optimize payments on the frontend and the backend, helping businesses to develop new customer features as well as streamlining backend payments processing.

Embedded banking

Using account infrastructure like virtual IBANs, businesses can create hundreds of thousands of accounts, with the ability to receive and send funds in multiple currencies.

Embedded lending

Embedded lending enables businesses to offer lending services and reap the rewards of an additional revenue stream, without taking on the credit risk.

Embedded insurance

By embedding insurance into the buying journey, businesses can offer customers the chance to insure their goods at the point of purchase, without a long application process with a third-party slowing things down.

BNPL as a part of embedded finance

Buy Now Pay Later (BNPL) services are forming a core part of the embedded finance industry. Customers receive their purchased product or service immediately by using the interest-free payment plan, and retailers or providers can increase sales and avoid the high fees of credit card payments. These kinds of BNPL embedded payments for platforms also enable retailers to accept a variety of payment methods, but for businesses considering entering the BNPL market, it can also be very useful to partner with an experienced software vendor to build technical capability quickly and efficiently.

Embedded payments for platforms

Embedded payments are becoming a major selling point for SaaS (Software as a Service) platforms and marketplaces. Indeed, using an embedded enterprise payment system can now become a key part of a product offering.

The benefits of offering embedded payments

Platforms and marketplaces can benefit from offering embedded payments in several ways, including:

  • Saving time by setting up payments with a single click, rather than selecting payment providers or connecting payments to various platforms.
  • Avoiding troubleshooting with multiple support desks.
  • Improving the user experience by making it easy to access the goods and services.
  • Taking full control of payments, allowing businesses to sell and get paid without relying on third parties.
  • Increasing user satisfaction.

These are just a few examples of embedded payment use cases, illustrating how your company could reap significant benefits from their implementation.

Grow with embedded finance solutions

Embedded finance can encourage growth and boost user engagement. It can also help to open new revenue streams, which is important in a changing market landscape. More specific benefits of embedded finance solutions give businesses the opportunity to:

  • Boost customer lifetime value (LTV): Supporting services help by creating a software ecosystem for customers that offers multiple useful features, all in the same place.
  • Decrease churn: Using embedding services, such as a payment processor guide, accounts, and access to capital provides customers with good reasons to keep using your services.
  • Add new revenue streams: Open new revenue streams by capturing interchange revenue, charging processing fees, or assisting partners to provide financial services.
  • Improve customer experience and satisfaction: Embedding financial services saves time and makes things easier for your customers and encourages loyalty.

The future of embedded finance

As more businesses begin to understand how embedded finance can revolutionize the way they operate, those not exploring their embedded finance options face the potential risk of being left behind. In a challenging and changing marketplace, this could be damaging. Embedded finance provides the opportunity to improve services and grow the business in new and exciting ways and represents the future of payment platforms. It is shaping the way consumers pay for goods and services and making faster, smoother, and more modern payment experiences possible.

Embedded finance represents a significant opportunity for enterprises that are willing to adapt and innovate. There is an increasing demand for convenient financial services, such as the ability to accept a variety of payment methods, and the rise in online transactions is driving growth. Enterprise businesses may need to consider their embedded finance options and work out how they can incorporate embedded features into their business models. If that is not possible in-house, then they may want to consider collaborating with companies that specialize in embedding financial infrastructure into products or services.

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