Embedded Finance and it’s effect on business world
Imagine a world where any platform you use—whether it's a shopping app, social media, or a ride-share service—seamlessly manages payments, loans, or insurance without redirecting you to a bank or third-party provider. This reality is already here, thanks to embedded finance. This article explores why it’s gaining traction so quickly, the business benefits it offers, and the challenges you may encounter in implementing it.
If you’ve been considering ways to keep your customers more engaged while tapping into new revenue streams, embedded finance could be the solution. As more businesses integrate financial services directly into their offerings, they not only meet customer expectations but also unlock new revenue, strengthen brand loyalty, and set a new standard for others to follow.
In this article, we’ll cover:
What Is Embedded Finance?
Embedded finance is the integration of financial services such as payments, lending, and insurance into non-financial platforms. It allows businesses to offer these services directly within their apps or websites, creating a seamless experience for users without the need for external tools or banking infrastructure. For example, when someone uses an app to request a ride, purchase from TikTok or order food, they are engaging in embedded finance.
Embedded finance has been around for a while, in the forms of airline credit cards, car rental insurance, and payment plans for high-priced items. Now, embedded finance is taking hold online, allowing you to offer banking services directly on your websites without re-directing customers to a bank.
Why Should You Care About Embedded Finance?
According to Global Market Insights, the embedded finance market was valued at $58 billion in 2022 and is projected to grow at a compound annual growth rate of over 29% until 2032, potentially reaching $730.5 billion. Can you imagine the growth potential for your company if you become an early adopter? Although we are just at the beginning of embedded finance, it is rapidly becoming an industry standard, and we can only speculate on when new embedded finance solutions will emerge. Additionally, 88% of companies that implement embedded finance report increased customer engagement, and 85% say it helps them acquire new customers.
What Business Problems Does Embedded Finance Solve?
Embedded finance is all about convenience. Nearly half of millennials would consider opening a checking account with Amazon, and over 30% would do the same with brands like Starbucks, Uber, or Google. With embedded finance, services and payments are streamlined on a single platform, making transactions quicker and reducing the need for physical banks or separate websites. For instance, Shopify Pay speeds up checkout fourfold and boosts order rates by 1.7 times, showing that convenience significantly reduces cart abandonment.
Drawbacks to Embedded Finance
Potential risks include:
Benefits of Embedded Finance
Embedded finance creates new revenue opportunities within existing buying processes, including loans, investments, subscriptions, fees, and usage-based pricing, with more options on the horizon.
Positioning yourself as a financial services provider strengthens brand loyalty and builds customer trust beyond simple transactions. With embedded finance still in its early stages, few competitors will be able to adapt, positioning you as the one-stop shop for your clients' needs.
Keeping customers within a single ecosystem simplifies identity verification, speeds up transactions, and provides seamless services that keep users engaged without needing to switch platforms.
Through embedded finance, businesses can diversify their offerings by including services like loans, insurance, and payment solutions. This builds a more robust, ongoing customer relationship rather than focusing solely on one-time transactions.
Embedded Finance
Embedded banking integrates banking services—such as accounts, payments, and card issuing—directly into non-financial platforms, simplifying financial management for users. For instance, Shopify Balance offers business banking within Shopify's platform, allowing businesses to manage their finances seamlessly.
Embedded payments integrate payment processing directly within platforms, creating a seamless user experience by allowing transactions to be completed without leaving the app.
Embedded lending integrates loan options directly within platforms, enabling customers to access credit seamlessly at the point of sale.
Embedded investing integrates investment options within existing platforms, allowing users to grow their wealth by directing saved funds into investments without needing a separate account or advisor.
Embedded insurance integrates coverage directly into the purchase process, enabling customers to add protection effortlessly while buying a product.
Embedded financial tools integrate services like invoicing and billing directly into platforms, streamlining financial management. Embedded invoicing, for example, uses payment links to speed up collections, improving cash flow and adding value to the platform by transforming invoicing into a financial service.
Is Embedded Finance Suitable For You?
Embedded finance is no longer limited to big tech or financial services providers. E-commerce, SaaS, fintech, retail, hospitality, media, and automotive firms are increasingly adopting it to gain a competitive edge. With the rise of APIs, integration is easier than ever, enabling businesses to implement embedded finance quickly. One such API is Space Invoices, which supports integrated payment links in your invoices and payment processing. If you’d like to learn more about how we can help, please contact us.
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