AMR Future Brief | Embedded Finance: Transforming the Financial Landscape with Enhanced Customer Experience

In the last few years, embedded finance has emerged as a significant trend in the financial services industry, seamlessly integrating financial products and services into non-financial platforms. This integration enables companies to offer banking, insurance, lending, and payment services directly within their ecosystems, enhancing customer experience and creating new revenue streams. With technological advancements and changing consumer expectations, embedded finance is rapidly evolving, presenting numerous applications and opportunities across various sectors.?

A look into some examples of embedded finance?

Effective embedded finance solutions offer suitable financial services to customers irrespective of their geographical boundaries. Whether it be a loan, payment program, insurance plan or to make payments, these services and products provide wider and flexible alternatives to individuals. Some of the most common examples of embedded finance include fintech, banking, payments, credit-cards, lending, investing, and insurance.??

Sometimes, embedded banking or banking-as-a-service are also referred to embedded finance. This is because these financial solutions such as lending, and payments are typically offered by banks. With embedded banking, many non-financial companies offer a branded checking account to their users to hold funds and make payments. For instance, Lyft, a famous ride-sharing app offers checking accounts and associated debit cards exclusively to its drivers to immediately pay after every ride. By using these debit cards, they also get cashback and rewards which are not offered anywhere else.?

Another notable example is Shopify Balance, which allows Shopify store owners to make faster payments, eliminating the need to open separate business bank accounts. It also offers a debit card with exclusive rewards to customers for making purchases from the store. Such financial solutions are designed to improve platform loyalty and offer convenient user experience.??

On the other hand, embedded payments are one of the forms of embedded finance which refers to the integration of payments infrastructure to create a seamless payment flow within an app or a platform. Payments, once the first financial service integrated into non-financial products, have now become a crucial component of the value proposition for any e-commerce app or software-as-a-service (SaaS) platform. These payment solutions offer wide use cases including in-game purchases in video games, integration of e-wallets in E-Commerce apps, subscription-based payments for SaaS, and more.???

Furthermore, embedded insurance is another example of embedded finance which refers to the building of insurance within the purchase of a product or service. Many embedded insurance companies provide transactional Application Programming Interfaces (APIs) and technologies that allow insurance solutions to integrate with mobile apps, websites, and other partner ecosystems. For instance, Tesla offers auto insurance for online point-of-sale as well as for in-showroom purchases.??

Moreover, embedded investing allows non-investment service companies to offer investment options that enhance customer experience and open additional avenues of revenue for companies. Traditionally, investing required consumers to open a new account with a legacy financial institution, like Fidelity or Goldman Sachs. However, with the rise of embedded investing, consumers can now buy cryptocurrency from other platforms they already use, including Venmo and Paypal.??

Four ways through which embedded finance can change the future of fintech??

Embedded finance is going to alter the way both financial and non-financial companies conduct business in the future.? With more companies entering financial services, providers should work with non-financial companies to offer personalized services. This is expected to increase competition among traditional finance companies, resulting in better products and customer services.??

In addition, embedded financing solutions are rapidly evolving to create new revenue streams as many non-financial companies are likely to find creative ways to attract more customers to avail themselves of their services. This is going to boost the demand for embedded investing in the coming years. Moreover, with continuous developments in these financial services, many non-financial companies are predicted to alter their business models to compete with new entrants. This leads to the rise of niche neobanks such as tribal neobanks, and neo banking for employees, which allows businesses to offer banking to their employees to increase retention.??

Moreover, embedded finance is anticipated to surge the need for long-term partnership among financial providers and other brands to improve their skill sets without hiring whole teams of financial experts and software developers. This financial transformation is expected to impact on every sector as more companies adopt embedded finance and as consumers become more comfortable with these services.?

Mitgo Group join forces with Embedded to launch a cutting-edge business division?

In March 2024, Mitgo Group, a Germany-based marketing technology provider acquired the UAE-based embedded finance platform Embedded to offer a wide set of solutions from the field of embedded finance. This acquisition allows millions of publishers across the globe, with a specific focus on currently underbanked audiences in the MENA, APAC, and LATAM regions, to withdraw their earnings instantly instead of the standard waiting period of 60-120 days. They also get access to loans, reduce transaction costs, minimize exchange commissions, improve transaction speed, and get many other benefits. Under this agreement, Mitgo Group, having 15 years of experience in the affiliate marketing and expertise in using unique algorithms using AI and machine learning, aims to help Embedded to accurately access such borrowers and build a low risk but profitable loan portfolio.??

FIS’s new embedded finance platform for financial institutions and businesses?

In March 2024, FIS, a renowned fintech company launched its latest embedded finance platform: “Atelio” with the help of financial institutions, businesses and software developers. This newly designed platform helps companies collect deposits, move money, issue cards, send invoices, fight fraud, forecast cash flows and better understand customer behavior. With this launch, FIS aims to reinforce its foothold in the embedded finance industry with a complete suite of financial tools. The company also mentioned three of its clients: KeyBank, College Ave, and RoyalPay who have started using Atelio to offer their key services. However, the company also plans to target businesses outside of financial services.??

In summary, embedded finance is rapidly evolving driven by technological advancements, regulatory changes, and strategic partnerships. Moreover, the increasing demand for hassle-free and convenient financial services among consumers is expected to pave the way for the development of advanced and customer-centric financial solutions in the future.??

To get more insights into the evolving landscape of embedded finance, reach out to our industry experts here! You can also chat with them directly through our chat window.?

? **?????????????? ????????????: Rosy Behera?

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