The inescapable technology enables faster and more convenient access to financial services.
Embedded finance is a new approach to financial services that seeks to integrate financial functionality into everyday products and services, rather than having consumers seek out financial services on a standalone basis. This approach is also called “finance-as-a-service” or “banking-as-a-service“ as it is acting as a API or SDK that other businesses could utilize in their platform, providing access to financial services to their own customer base.
Embedded finance has the potential to revolutionize the way people access and use financial services by making them more convenient and accessible. For example, a ride-sharing app could embed financial services, such as the ability to pay for rides using a credit card, directly into its platform. This would eliminate the need for customers to leave the app and navigate to a separate payment platform to complete their transactions.
Embedded finance can also help businesses to access new revenue streams and customer bases. For example, a retail company could embed financial services into its platform, such as the ability to apply for a loan or open a bank account. This would allow the retail company to offer its customers a wider range of financial services, while also generating additional revenue.
Embedded finance allows companies outside of the financial sector to offer and manage financial services to their customers through a streamlined integration provided by banks, fintechs, or other regulated entities. This enables companies in any industry to incorporate services like payment processing, lending, and insurance directly into their non-financial operations.
Another key aspect of embedded finance is the use of open banking APIs. With this approach financial institutions are opening their systems to third party developer that can access customers’ data and perform transactions in the customers behalf. This allows Fintech and other third-party providers to offer their services directly through a bank or credit union’s own app or website, without the need for customers to set up new accounts or logins with each provider.
Embedded finance also has the potential to foster competition and innovation in the financial services industry. By making it easier for businesses to offer financial services, embedded finance could lead to the emergence of new players in the market, as well as the development of new and innovative financial products and services.
Embedded finance is a relatively new concept and is still in the early stages of development. However, it has the potential to greatly impact the financial services industry and the way consumers access and use financial services. It is important for financial institutions and businesses to be aware of the potential opportunities and challenges associated with embedded finance and to explore ways to take advantage of this new approach to financial services.
Overall, embedded finance is a term used for representing the integration of financial services and products as a feature in other businesses platform, with the main goal of delivering the financial capabilities to a wider audience and increase revenue streams for those companies providing the service. It’s a relatively new approach that has the potential to change the way consumers access and use financial services.
Photos by Mohammad Rahmani – Unsplash