Embedded Finance: Turning Non-Financial Firms Into Fintechs

Discover the advantages of embedded finance, such as enhanced business operations and customer experience, and why analytics is at its core

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There’s a lot of talk about fintechs and their potential to disrupt the financial industry as we know it. But what if there was a way to make fintech even more disruptive?

Embedded finance is a popular term in the tech industry these days, and for a good reason. It’s a great option for fintechs because it allows them to tap into the resources of non-financial firms.

There are a lot of potential applications for embedded finance. One example is providing financing options for customers who wouldn’t normally have access to them otherwise.

This article explores embedded finance and how it can benefit both everyday companies and the fintech industry. Read on to learn more.

What does embedded finance mean?

In short, embedded finance is the process of integrating financial services into non-financial companies. This integration can be done in several ways, but the goal is always to make it easier for consumers to manage their finances and access products and services.

According to Roy Zakka, Founder and CEO of Layer, “The pandemic has accelerated change in how businesses manage payments. Embedded finance has grown significantly in tandem, by enhancing the convenience in the customer journey, along with myriad benefits for retailers including an opportunity to increase retention, improve engagement, and enhance the brand value.”

The benefits of embedded finance

For non-financial companies, embedded finance is a great way to get into the fintech space. By integrating financial services into their businesses, they can offer their customers more convenience and flexibility. In addition, embedded finance can help these companies tap into new markets and attract new customers.

Embedded finance also has benefits for the fintech industry. It can help fintechs reach more consumers and make it easier to offer their products and services. In addition, embedded finance can help fintechs stay ahead of the curve and maintain their competitive edge.

“Segmentation is the heart of embedded finance. The platform integrates seamlessly into a business, so the transition from analysis to action is smoother and more effective as it doesn’t need the diversion of resources or budget from daily operations,” added Zakka. “In addition, it provides brands with extremely detailed customer insights that can be deployed in creative ways to evolve and grow the business.”

Analytics at the heart of embedded finance

One of the core advantages of embedded finance is analytics. By integrating financial services into their businesses, companies can better understand their customers and what they want and need at a faster rate.

According to research by KoreFusion, “By connecting directly with the buyer, sellers improve their experience, better control the outcome, gather important data for analytics, and can generate extra revenue from the new service itself.”

By leveraging data, companies can make better decisions and improve their businesses in various ways. Some examples include:

  • Improving marketing efforts
  • Optimising product offerings
  • Enhancing customer service
  • Reducing overall expenses
  • Improving business operations
  • Targeting specific markets
  • Attracting new customers

Analytics provides the foundation for better decision-making and helps companies achieve their goals. Such data is more readily available and easier to access with embedded finance.

The future of embedded finance

Embedded finance is still in its early stages, but it has great potential to disrupt the financial industry. Companies that embrace embedded finance will offer their customers more convenience and flexibility, while fintechs will be able to reach more consumers and capitalise on the opportunity.

“Whether it’s taking a car loan directly through Tesla, buying a new shirt through Instagram, or paying for takeaway food through the restaurant’s app, embedded finance has the potential to allow every company to become a fintech company. With the market predicted to reach US$138bn by 2026, it is the future, not a phase,” concluded Zakka.

In summary, embedded finance is an excellent way for non-financial companies to get into the fintech space, and it has many benefits for the industry as a whole. By leveraging data and analytics, companies can improve their businesses. The future of embedded finance seems bright.