In the ever-evolving world of digital banking, a new trend is rooting out that is reshaping the way financial services are offered and experienced.
Yes, embedded finance it is!
Financial services are increasingly entering into customers' daily lives through the concept of embedded finance. Embedded finance, the integration of financial services into non-financial platforms, is rapidly gaining popularity as the next big trend in the industry.
But why should you care?
With over a million new suppliers entering the market annually, more industries than ever before are now providing embedded financial services on their platforms. Big companies like Stripe, Adyen, PayPal, and more are the key players in the embedded finance market.
Payment processors, lenders, banks, insurance, payroll, retailers, and even eCommerce marketplaces, are attempting to introduce their own embedded financial services in order to lead the competition.
Let's see the numbers.
Embedded Finance: Stats and Figures
Here are some stats and figures that show why embedded finance for enterprise is the next big thing:
These stats and figures show that embedded finance is a rapidly growing market with a lot of potential. So, if you are looking to stay ahead of the curve, you should consider adopting embedded software development services.
What is Embedded Finance?
Embedded finance is the integration of financial services into non-financial platforms, products, or services. By including financial transactions, payments, lending, and other services into existing platforms, apps, devices, and ecosystems, customers can seamlessly manage their finances without the need for separate financial channels.
The financial services it provides include (but are not limited to) payments, lending, insurance, investments, savings, and financial management tools.
eCommerce websites often provide integrated checkout processes, enabling customers to make purchases and choose from various payment options seamlessly. This integration eliminates the need for customers to switch between different apps or websites for financial transactions, making the process more convenient and efficient.
Examples of embedded finance include offering payment processing within an e-commerce platform, providing digital wallets in ride-sharing apps, or enabling investment options in a retail banking app.
By integrating financial services at the point of need, embedded finance is reshaping traditional banking and financial models, fostering collaboration between fintech companies and various industries, and driving the democratization of financial services in the digital age.
Its three categories include:
If you have any interest in embedded finance and want to utilize it for your business or any related digital transformation services, contact us and get a consultation for free.
Why Is Embedded Finance Becoming the Next Big Thing?
There are a number of reasons why embedded finance is becoming so popular.
Difference Between Traditional and Embedded Finance
Traditionally, financial transactions were conducted through separate channels, such as visiting a bank branch or accessing dedicated financial platforms. However, with embedded finance, financial services are seamlessly integrated into various aspects of customers' routines and activities, making them an integral part of their daily lives.
Let’s see the difference in tabular based on its features:
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.
Trends That Are Driving the Adoption of Embedded Finance
Businesses are adopting embedded finance at a faster pace for their enterprise solutions. And the adoption number is increasing with new trends coming in. Here are some key factors that are leading to the growing adoption of embedded finance:
Technological Advancements:
With technology rapidly advancing, mostly in the fields of cloud computing, APIs (Application Programming Interfaces), and data analytics, it has become quite simpler now for businesses to add financial services to their non-financial platforms. With less complexity and being very cost-effective, the integration of financial capabilities has become an easy task.
Digital Transformation:
With digital transformation taking place across industries, there has been an increasing demand for integrated and seamless experiences. Accessibility and ease are what today’s consumers demand in all facets of their lives, especially financial services. And embedded finance meets this demand by providing integrated and frictionless financial solutions within already-existing digital platforms and ecosystems.
Open Banking and APIs:
The open banking efforts and the accessibility of APIs have eased embedded finance leading to secure access to financial as well as non-financial data. Businesses can now integrate financial services more easily into their platforms, thanks to APIs, serving as bridge connecting systems and speeding up the flow of data and services.
Consumer Expectations:
In the end, all that consumers demand is to get the most personalized and tailored experience. Embedded finance provides this experience by letting you give your customers customized financial services based on their preferences and behaviors. By integrating financial services into your existing platforms, you can offer a seamless and personalized experience to your customers, meeting their upgrading expectations.
Fintech Disruption:
There has been a growing demand for fintech software development, and fintech companies have been at the forefront of embedded finance, providing easy-to-use, digital-native financial solutions that can be easily integrated into various platforms. Their adaptability and focus on the consumer have made embedded finance more widely accepted.
Partnership Opportunities:
Collaboration between non-financial companies and financial ones is made possible by embedded finance. Non-financial platforms can make use of the expertise and infrastructure of financial institutions, while financial institutions gain access to new customer segments and distribution channels. Through this cooperative method, financial services can be incorporated into a variety of sectors and ecosystems.
Regulatory Environment:
Even the regulatory frameworks are changing to keep up with the embedded financial structures. Governments and regulatory organizations are enacting laws and rules that promote innovation and competition while maintaining consumer protection and financial stability. Businesses can securely undertake embedded finance initiatives and navigate the regulatory environment thanks to clear norms and procedures.
Enhanced Data and Insights:
Embedded finance generates vast amounts of customer data, providing valuable insights for businesses and financial institutions. By analyzing this data, you can get a deeper understanding of customer behavior, preferences, and financial patterns. These insights will let you refine your products, optimize your offerings, and make data-driven decisions to enhance customer satisfaction and profitability.
These factors combined are leading to the growing demand for embedded finance, making it an attractive and viable option for businesses looking to enhance customer experiences, drive innovation, and unlock new revenue streams.
Bottom Line
Yes, it is truly said that embedded finance for enterprise is the next big thing in the world of financial services. The blend of financial capabilities to non-financial platforms offers many advantages, with outstanding customer experiences, convenience, personalization, more revenue streams, and of course, innovation opportunities.
So, if you are thinking of starting your business in the same, this is the right time. Choose us as your development partner for your fintech software development as we understand the complexities involved in integrating financial services into diverse platforms, and our team of skilled professionals possesses the technical know-how and industry knowledge to deliver exceptional results.
