Embedded Finance connects multiple parties and enables them to play to their strengths. Over time, the final combination adds up to more than the sum of its parts and all parties involved.
To that end, embedded finance combines financial services with non-financial products and technologies. This enables organizations to generate revenue by embedding services themselves instead of redirecting users to a third party. As a result, customers are not required to be outside of the ecosystem of a product or service to access banking or financial services.
BaaS & Embedded finance
Banking-as-a-service (BaaS) providers help third parties develop the technology necessary to build products that allow them to launch their own financial services. Using Baas, they can provide cards, loans, and compliance-related services, such as KYC and money laundering checks.
Embedded Finance For An Uninterrupted Customer Experience
The embedded finance model enhances the customer experience by offering financial services such as credit cards and accounts within the customer journey, rather than redirecting customers to another business or bank. Consequently, customers do not have to contact third parties.
They can instead do their business on one platform. Providing a better customer experience will help the business gain the loyalty of their long-term customers and expand their customer base.
Exponential Growth In Conversion Rate Through Embedded Finance
As mentioned, embedded finance can boost customer experience, meaning businesses will be more likely to convert prospects into active customers. Companies can also offer customers Buy Now, Pay Later (BNPL) services that can narrow down the steps of payment and lending into a single click.
By increasing the buying process’ ease, businesses can attract new customers, who become loyal in time as a result of convenience. Besides gaining more information about their customers through Open Banking platforms such as Account Information Services, businesses can examine their purchasing behaviour through transaction history, enabling them to further improve their products and services.
Embedded Finance In Greater Detail
The term embedded finance does not refer to payments alone, but other applications as well. As part of embedded insurance, agents are removed from the process of purchasing an insurance policy, and insurance is integrated into contextual customer journeys, such as when a customer purchases an item that needs to be insured. Besides, when businesses remove unnecessary intermediaries and present insurance products only when they are required, customer experience is made more favourable whilst generating new revenue streams.
The embedded finance industry will be the next evolution of the fintech industry. It will benefit not just customers but also companies. That being said, many businesses in diverse regions have already incorporated an embedded finance strategy into their business operations.