Is Embedded Finance the Next Evolution in Fintech? (2024)

Imarticus
August 11, 2021

What is Embedded Finance?

Over the decade banking services like lending, payments, remittance have shifted from being under the sole purview of banks to non-bank service providers. The various financial services have come to be embedded within the software and applications of the non-bank providers streamlining both customer and business enterprise experience. Embedded finance or embedded banking, as is popularly termed, is the future of Finance Technology (abbreviated Fintech).

It is essentially the merging of a non-financial service provider, for example, a telco or local SaaS business, with a financial service provider.

With embedded finance reshaping and creating new roles for technology companies in the financial world, a career in Fintech will prove to be highly rewarding in the coming years.

For this, it is imperative to know what is a Fintech professional and the best Fintech courses in India that one can opt for.

Role of Embedded Finance in the Industry

With the world increasingly adapting to the digital revolution, businesses, both local and international, are looking forward to expanding their horizons to provide banking services ranging from providing loans, cashless payments, credits, debit cards, and e-wallets. Earlier businesses had to create a Fintech arm within the company costing a fortune to oversee the financial operations.

However, with embedded finance infrastructure, this disadvantage has been overridden resulting in almost double the normal profit. And with the disappearance of third-party banks, the process becomes smoother for the consumer. It lures the customer with its easy transaction process thus monetizing him/her and expanding the business.

Apart from integrated payments, the other high point of embedded finance is the ease of accessing in-app credit programs and loans, enabling the customer to complete a purchase without leaving the app and converting it into an EMI at the checkout point as is seen with Amazon.

Embedded card payment involves the creation of the company’s own cash card in exchange for a white label debit card. The cash card is linked to the user’s bank account giving him direct access to his user balance. This can be arranged by the company at a small interchange fee with the partner bank.

Embedded insurance is also being integrated into the buying experience of customers to seamlessly complete the procedure of insuring a car or home or other such purchases without the inclusion of a third-party insurance company. This is not only cost-effective but also saves a lot of time and pain on the part of customers as demonstrated by major automobile companies.

Embedded banking has taken a step forward in the evolution of the Fintech industry by taking investment into its territory. Investment has always been a tricky affair for the common man. With API-based brokerage firms leading the way for embedded investments, it is no longer a faraway dream. Platforms have integrated stock market investing by building microservices beginning with opening an account and ending with trading and market data.

The Way Forward

Fintech Infrastructure stands upon three pillars - digital platforms, financial institutions, and embedded finance infrastructure companies. To make each of these pillars functional data science, AI, cloud management, and blockchain development work together. To understand what is a Fintech professional’s role and how to make a career in Fintech, you can check out the professional Fintech certificate course.

It is best to start young if you are looking forward to making a career out of Fintech and especially embedded finance. One can choose from some of the best Fintech courses in India and opt for a subject of his/her choice. An undergraduate course in finance, economics, engineering, commerce, or management followed by post-graduation in the specific field can open avenues for youngsters and aid them in building a lucrative career in Fintech.

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Is Embedded Finance the Next Evolution in Fintech? (2024)

FAQs

Why is embedded finance the next evolution in fintech? ›

By embedding financial services into platforms people already use, companies create a more natural user experience. Users can complete transactions, manage their finances, and access a range of financial products without leaving the platform they are using.

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What is the prediction for embedded finance? ›

Embedded Finance Market Anticipated to Surpass $228bn by 2028; B2B Market to Propel Growth. Hampshire, UK – 2nd April 2024: A new study from Juniper Research, the foremost experts in fintech markets, has found that by 2028, embedded finance revenue will increase 148%; from $92 billion in 2024 to $228 billion in 2028.

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How is embedded finance the future of the economy? ›

It can provide access to new markets while reducing customer acquisition and servicing costs. Embedded finance offers ways for banks to monetize without raising costs to their customers. This enables companies to seek out banks to assist with their core offerings.

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What is embedded finance fintech? ›

Embedded finance is the term for integrating banking and other financial services into nonfinancial apps and services. Companies are merging banking, lending, insurance, and investment services with their customer offerings through application programming interfaces (APIs) linked to financial partners.

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Why is embedded finance the next big thing? ›

Difference Between Traditional and Embedded Finance

Embedded finance will provide a more seamless and convenient experience for customers. It opens new opportunities for partnerships, customization, and access to customer data, which can drive innovation within the financial industry.

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What are the benefits of embedded fintech? ›

What are the advantages of embedded finance?

New revenue streams.
Increase conversions and conversion value.
Access new customer data.
Leverage existing customer data.
Improve customer experience and trust.
Go to market fast, and at lower cost.
Avoid regulatory hurdles and certification.
Adaptable to your business' needs.

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What problems does embedded finance solve? ›

Embedded finance lets companies extend financial products to customers without having to establish the same regulatory groundwork as a licensed financial services provider. It encompasses a broad range of use cases, including payments, loans, insurance, credit cards, and wealth management.

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Is embedded finance growing? ›

Embedded finance can improve the customer experience and unlock a huge market opportunity for businesses, and is projected to rise dramatically in the coming years. It's estimated that embedded financial services will produce $384.8B in revenue by 2029—a nearly 17x increase over the $22.5B in revenue generated in 2020.

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What is the impact of embedded finance? ›

Embedded finance allows customers to access financial products and services in a seamless and personalized way, without having to leave their preferred digital interface. It is enabled by the collaboration of banks, technology providers, and distributors of financial products via non-financial platforms.

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How big is the embedded finance market? ›

Embedded Finance Market size was valued at $58 billion in 2022 and is estimated to register a CAGR of over 29% between 2023 and 2032. The surge in digital payments is driving the market growth to over $730.5 billion by 2032 by fostering the seamless integration of financial services into various platforms.

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What is an example of embedded fintech? ›

Take Uber, for example. You can easily get to your destination with just a click of a button, and the added bonus is that you don't have to pay the driver when you get to your destination. Payments are embedded behind the scenes for an easy experience. Another example that may not be as obvious is insurance.

What is the best example of embedded finance? ›

Applications that integrate stock market investing like Robinhood, Acorns and Cash App are examples of embedded investment companies. Buying, selling and trading stocks can happen without leaving the app or working with an investment adviser.