The understanding and implementation of
technology in various aspects has allowed us to transform how we
perform financial tasks. Today, we can initiate a number of financial
tasks at a click! And, it only gets innovative as we delve deeper.
Finance is no longer associated with ‘banking’ only rather, several
businesses are offering it as an extension to their existing service
stack, referring to it as Embedded Finance.
Embedded finance is the integration of
financial services into a traditionally non-financial platform. This
integration allows customers to access financial services, for
instance- payments, within the service app. Earlier, if a
non-financial business would want to offer a financial service, they
would’ve had to build a corresponding financial arm with their
organization. Today, with the help of embedded finance, all it takes
is integration thereby, lowering expenditure significantly.
Embedded finance has enabled businesses
to increase their customer lifetime value by offering them a complete
journey on a single platform while diversifying their product stack.
As per Bain Capital, embedded finance has the potential to become a
USD 7+ trillion dollar market, while also being referred to as
the ‘fourth platform’. The given target does not seem
unattainable since Embedded finance has branched out to various types.
Here are a few examples of businesses that have adopted Embedded Finance-
Examples of businesses that use Embedded Finance
|Type of Embedded Finance
|Embedded Payments||Zomato, Uber, Big Basket|
|Embedded Lending||Croma, Amazon, Flipkart|
|Embedded Insurance||BMW, Honda, Tata|
Embedded Payments- This is used while buying a product or
availing a service through a non-financial business. The check-out
and payment settlement process is now a part of the platform rather
than an extension. Severalbusinesses also offer Embedded Card
Payments, also known as smart cards, virtual cards, or expense
cards, that allows an individual to transfer cash electronically.
Embedded Lending- Non-Financial businesses offer loans with a
credit limit at the time of purchase which otherwise, was a lengthy
process. Buy now, Pay Later is an appropriate example to explain
embedded lending, quickly and seamlessly.
Embedded Investments- Embedded investments enables investment
by offering users a single platform to invest and manage their
money. It allows users to invest in various financial offerings like
capital market, mutual funds etc without leaving the existing platform.
Embedded Insurance- Businesses collaborate with external
insurance companies rather than introducing an in-house product or
service. Insurance companies integrate transactional APIs and
technologies into their insurance solutions to provide service on
mobile apps, websites and other partner ecosystems.
Embedded Banking- It is when services similar to what banks
provide are offered by non-financial players, apart from critical
offerings restricted to banking institutions only. It allows you to
make investments, apply for loans, manage your transactions etc., on
Embedded finance is enabling companies to widen their demographics
while offering an end to end solution on a single platform. Businesses
from various domains are adopting embedded finance to stay ahead in
their area of competition.