In today’s rapidly evolving economic and business landscape, the FinTech industry is a shining example of innovation, with each year redefining how we engage with our finances. Embedded finance, a transformational asset to the industry, is at the forefront of this shift for both consumers and businesses, disrupting the direction of financial services and FinTechs. It’s no coincidence that embedded finance’s projected revenues are expected to soar to $160 billion by 2025, and its critical role in pushing the growth of the FinTech sector forward cannot be understated. Its influence is far-reaching, from bettering global financial inclusion, to being the lifeline that small and medium sized enterprises (SMEs) need in these challenging economic times. Its trajectory is one of rapid success, and its potential to transform how we all interact with FinTech, in both our everyday and business lives, is boundless.
Embedded finance: today
Put simply, embedded finance refers to the seamless integration of financial services into non-financial platforms, products, or services. Despite being a relatively young area of FinTech, embedded finance is already a well-integrated part of our lives. Many of us are likely to be benefitting from the power of embedded finance every time we make a purchase or booking, and its ease is something we’re all too familiar with. The consumer mindset has shifted, and frictionless finance is no longer just a welcome addition to our financial experience, but an expectation.
It’s easy to understand why. Embedded finance has a wide-range of benefits for both businesses adopting the technology, and the consumers using them. An enhanced and convenient customer experience is the biggest draw, with embedded finance giving businesses the power to offer services such as payments or lending without their customers needing to leave for another platform. Customer journeys are uninterrupted, with every interaction taking place natively.
For SMEs, being able to offer an unrivalled customer experience leads to increased conversion rates, benefitting the management of their cash flow. SMEs are the backbone of the economy, and giving them the power to diversify their revenue streams and boost sales within their own platforms, makes embedded finance an essential part of their success.
On the flip side, SMEs can also become satisfied customers of embedded finance and lending providers, with data-driven insights giving them personalised financial solutions - such as loans that apply their business needs and ability to repay, to greater cost efficiencies - by being able to leverage an embedded finance solution rather than developing their own which is both costly and timely. The benefits of embedded finance aren’t just applicable to consumers and SMEs, but also traditional banks. Banks can partner with embedded finance providers to ensure a wider range of their customer base are engaged, as well as leveraging embedded finance data to understand the changes in customer behaviour. Doing so brings these traditional actors right into the fold of FinTech, helping them to accelerate their offerings at speed, and keep up with disruptors in the world of finance.
Capitalising on this disruptive technology
Embedded finance not only gives businesses the power to offer better financial services, but also to propel their own growth. Embedded finance is an intelligent, data-led technology, and having access to sound, relevant, and up-to-date data, especially during times of uncertainty, is essential.
Having a deeper understanding of consumers’ financial needs gives both SMEs, and incumbent banks, the power to tailor their offers to align with customer pain points. In doing so, they can both attract and retain customers, demonstrating a deep understanding of what consumers need, when they need it, and the way they want it to be presented to them. Analysing customer data also allows for continuous improvement, ensuring that embedded finance is performing as well as it should, and is quickly adaptable to both customer feedback and the ebbs and flows of the market.
One of the main concerns in interacting with embedded finance and lending is that of safety. We all want to be comfortable in the knowledge that both our finances, and the services we interact with, are safe. The financial landscape has always been a target for bad actors, and embedded finance offers a fresh opportunity to tackle this problem head-on. Embedded finance providers have a responsibility to develop strategies that protect vulnerable people, and combat potential attacks before they’ve happened. This is a top priority throughout the FinTech sector, and with limitless technology at our fingertips, we have the power to create robust security and compliance measures that solidify embedded finance’s place as a secure and essential part of the financial landscape.
What’s next for the new frontier of FinTech
With this in mind, embedded finance is on an evolutionary journey that is both exciting, and prosperous. Embedded finance has proved itself as a disruptor, with it being commonplace in payments and lending, but there is a huge amount of untapped potential, from developing robust and data-led security strategies, to harnessing embedded finance in connecting a global, flexible workforce.
As the adoption of embedded finance grows, so will the competition, and this will lead to ground-breaking and innovative solutions. Likely next stages for embedded finance will be the growth of blockchain technology, the transcendence of embedded finance across geographical boundaries, the development of competitor digital wallets, and a better-connected financial world. With this, regulation changes are expected to come into play, improving the protection of everyone using these services, and giving the technology as a whole the validation it deserves.
At the centre of growth and innovation
Embedded finance is the driving force behind innovation in FinTech, changing how we access financial services, and making them easier and more convenient for everyone. Businesses that embrace this change will see increased customer engagement, revenue diversification, and valuable data insights that allow them to better serve their customers. Succeeding in this fast-changing landscape requires adaptability and innovation. Embedded finance is more than just a trend; it's a big transformation in finance, and its impact will only grow in the future. Taking embedded finance seriously will set businesses up to ride the wave of the new frontier in global FinTech, and reap the rewards of the future of finance.
