Embedded Finance: The Next Big Thing In Fintech!

COVID-19 has changed the world completely. The global lockdowns have led to huge losses for many industries. Amid all this chaos, industries with technological advantages have risen up to their peak. They have witnessed commendable growth and are expected to do the same in upcoming years.

Witnessing the saga, more and more organizations are re-routing their plans and coming up with new products and digital-based solutions. The fintech industry is no different. One of the major developments this industry facing right now is Embedded Finance. 

If you are not aware of it yet, let’s find out more about it. 

What is Embedded Finance?

In simpler terms, you can call it an integration of fintech with a non-financial product, service, or solution, etc. With the emergence of digital-based solutions and services, non-financial companies are forced to look for new methodologies to offer their products and services to keep serving their customers. 

Embedded finance allows you to do the same. A recent study suggests that the value of the world’s market worth will be over $7 trillion in the next ten years. The opportunities linked to embedded finance are definitely going to rise over time. It also allows businesses to reinvent the services/ products they provide to their customers. Moreover, they limit the customer interaction and time consumption with other businesses related to the main purchase. 

“Great, isn’t it?”

Current Scenario

In the year 2021, the following are the areas that are mainly focused around embedded finance:

1. Insurance
2. Banking
3. Wealth Management 
4. Consumer Lending

The compound annual growth report suggests that the insurance sector will rise by 62%, i.e. $5 billion to $70.7 billion. Similar growth is to be expected from consumer lending, while the payments sector is expected to rise at the rate of 54%.

Embedded Finance: The Next Big Thing?

Consumer habits: 

The digitalization process has led to a great transition in the purchasing habits of consumers all over the world. While the older generation used to rely on the traditional methods, the young ones prefer to “order everything online”. Due to this, Amazon, Flipkart, Facebook, Ola, Uber are seen as top names in the industry. 

Adapt for ease:

The “Millennials” today expect more financial services from a non-traditional source rather than a traditional one. 

This not only makes processes less time-taking but also makes them smooth and easier.

Willingness to share personal data:

Embedded finance allows providing an enhanced customer experience with the help of the data shared by their users. Now, since the data shared comes more from the tech-savvy generation, the whole process and customer experience seem to be done in a much easier way than the way it used to be.

Using the same data, businesses can offer financial services at the right time for their end-user. More and more brands are coming up to capture this segment of the market.

Post-Pandemic Effect

The pandemic has changed the world in some serious ways. While an individual is now trapped in a remote environment, various businesses are re-innovating their traditional methods to meet consumer needs. For the same, they are relying either on Embedded Finance or Banking as a Service (BaaS).

Benefits of Embedded Finance

Now, since you know what embedded finance really means, here are some of the top points why any business should be after it. 

• Convenience

As repeated earlier, businesses nowadays are embedding banking as a service option to their existing mobile applications. This is being done to make the customer experience much easier and smoother.

• Seamless experience

Fintech companies are using various forms of data to improve their user experience, to keep them more engaged with their application/ product/ service. Designers, along with developers, are working tirelessly to find what works best for their users/ business.

[Also read: India’s Fintech Future: What Lies Ahead!]

• Increased revenue

With embedded finance, companies are expected to make almost 3-5x more of what they are making right now. The additional financial services are going to help them extend their base of operations, thus increasing their revenue by many folds. 

• Smooth transaction experience

Non-finance apps are aiming to provide a seamless experience through digital wallets, insurance, QR Codes, debit/ credit cards and much more.

Applications

The applications of embedded finance are endless. They are being used in a way that we couldn’t even imagine a few years back, and they will further be used in various unexpected ways. Be it services from ridesharing companies like Ola, Uber, or digital wallets, P2P payment services from Apple, Google, Amazon, Facebook, etc., they are and will be everywhere. 

So, to sum it up, we can consider embedded finance as that major bonus part of the industry currently that businesses are trying to take leverage of. With BaaS in place, many businesses are looking forward to providing an enhanced and rich customer experience, creating new opportunities, and simplifying existing services and whatnot!

What do you think the future will be for this latest disruption?!

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