Hussein Messi
juillet 16, 2022

Fintech funding to flow to embedded finance players

I am sure you must be aware about it – via Paytm, Google Pay; yes, you can name a lot of channels that make instant payments happen. But how is this happening, how are traditional banks getting replaced with digital transactions? Embedded Investment basically enables platforms to embed investments like equities, mutual funds, bonds, etc., within a digital marketplace app.

Embedded finance players

In 2021, we will see more brands take advantage of this capability. There is still a lot of room for innovation of the embedded finance applications in the healthcare field. An important use case is one in which a patient can gain access to credit while ordering a particular service of a medical organization. Many of these additional embedded payments sit on top of different providers. The below graphic from 11FS highlights the ideas upon which I am expounding. For the business enabling the embedded finance, such as a retailer, the primary benefit is the ease of use for its customers.

Airline retailing: How payment innovation can improve the bottom line

In this blog, we will speak about how embedded finance has changed the business world along with some exemplary use cases of it. In healthcare, embedded finance helps facilitate transparent pricing and offers multiple payment options for patients. Embedded finance is an excellent opportunity to offer a more convenient and personalized experience for clients, extend the customer base and earn more money.

  • Whereas embedded banking can remove or mask the role of traditional banks.
  • As recently as 2020, only 14% of consumers turned to their banks for financial help and guidance.
  • To help them overcome the risk, many embedded-finance technology providers are offering sales, servicing, and risk management expertise or are orchestrating other partners providing them.
  • Embedded finance takes this concept just one step further by expanding it to not just fintech players, but to any company.
  • We have seen this intersection of tech and finance embraced by taxi companies like Uber, for example.

Embedded Finance enables these businesses to monetize their customer base, increase their customer lifetime value, and importantly vertically scale their product offering. It reduces the challenges (costs, time, etc.) of building an entire FinTech solution. Embedded Finance is the seamless integration of financial services into traditionally non-financial services or products. Integrating embedded finance solutions with the latest technologies like artificial intelligence, machine learning and internet of things. The only restraint to the market is the unavailability of the internet, including the incompetency of the workforce.

Healthcare: Solving the financial problems of patients and providers

Today, banking, insurance, consumer lending, and wealth management have also come under the embedded finance umbrella. Customers can get access to affordable and user-friendly embedded banking services at the click of a button. The overall user experience on a digital platform is also improved. Since people are becoming more and more tech-savvy, technical integration is of enormous importance in selling insurance policies. Given the complexities in the traditional methods of buying insurance plans, we can say that embedded finance is a much more viable option.

By end user, investment banks & investment companies segment is the biggest segment in the embedded finance market and is expected to hold the largest portion in the forecast period. The market creates opportunities for a new kind of market that integrates fintech services to the financial management solutions to cater new end users. The covid-19 has also damaged a lot of sectors so that they are unable to invest in the latest technologies, including embedded finance solutions and services.

What is embedded finance?

“This requires strong risk and compliance management frameworks and capabilities at the corporation partners which can involve huge reputational risks for financial institutions. Before you plan to embed financial tools into your business, take a look at some of the main features of embedded finance. All in all, embedded finance is set to transform the manner in which the economy operates. With a steady rise in the number of online transactions, this evolution is set to create new and exciting opportunities in the coming days.

Embedded finance players

This is a real estate management platform with 6,000+ active users who upwards of 25,000 property purchases planned. The platform simplifies securing a mortgage, handling legal paperwork, and ensuring the property. 2021 will show the role banks will take in the evolved financial service arena. Embedded finance is creating plenty of opportunities both for individuals and businesses. Think of how easy you can get a loan, add a QR code payment option to your site, or provide a buy now pay later option for your clients.

The above are among the bigger players in the space, but we are in the early innings, and analysts expect a lot of consolidation in the coming years. As with any emerging industry, picking the winners is difficult, but you will find many choices that fit your investment criteria. The APIs allow every company to become a “fintech company.” Everything from grocery shopping, car repairs, doctor visits, and getting cash can become a fintech with the right API. Back in the old days, if you wanted to buy a couch, you had to go to the bank, withdraw the cash, and buy the couch.

Loup Ventures’ 2020 Tech Predictions

Another challenge is understanding the role your company would play in the ecosystem. More tech savvy corporate and banking services are adopting new, cutting edge fintech technologies to fasten the process and enhance customer experience. Regulatory trends including PSD2 and open banking are promoting the development of banking APIs and universal access. The need to comply with these new requirements—often through IT modernization—is driving some banks to consider expanded or new BaaS business models to recoup costs and take advantage of tech builds. Even beyond regulation, Plaid and other aggregators are changing customer expectations for data and account information portability, which is increasing IT modernization and BaaS projects.

Embedded finance players

Many distributors that are new to embedded finance are understandably concerned about how to build, sell, and service a financial product for end customers. Some of them may see the regulatory and reputational risk attached to financial products, especially lending, as an insurmountable hurdle. To help them overcome the risk, many embedded-finance technology providers are offering sales, servicing, and risk management expertise or are orchestrating other partners providing them. The ability to provide distributors with this kind of program management is likely to be a key source of differentiation in the long run. A few technology and balance sheet providers are building deep expertise in specific embedded-finance categories such as issuing, in order to claim outsize market share in these niches.

How does the future look for embedded finance?

If you’ve ever ordered groceries for pickup or delivery and paid for them within the app or website, you’ve experienced embedded finance for grocery stores. Of course, invoice financing in B2B marketplaces isn’t the only embedded finance use case. The business owner’s customer, who is responsible for paying the invoice, instead pays the invoice amount to the factoring company according to the original payment terms. Embedded finance is one of the hottest trends in the fintech space today especially since the pandemic hit. It is disrupting businesses by giving rise to enhanced and new revenue streams. The resulting connectivity to the client enables these companies to continually develop novel functionality tailored to their customers’ needs while minimising risk.

Meet the disruptors that are redefining banking—and what that means for banks – Fast Company

Meet the disruptors that are redefining banking—and what that means for banks.

Posted: Tue, 08 Nov 2022 08:00:00 GMT [source]

Banks can improve their consumer trust by partnering with fintech companies to enable their embedded services. The evolution of how people manage their money also highlights why banks and fintech need to work together. Embedded finance’s main goal is to make financial processes Best Upcoming Embedded Payment Trends easier for consumers by designing services and products that ease the payment process. Cash is dead is a popular term, and with the rise of fintech and the ease of making and taking payments, the acceleration of non-banking firms such as Stripe will only continue.

Grocery & Food Service: Shopping apps and niche marketplaces

With the creativity and ease of inventing new solutions via APIs, there are a plethora of companies for merchants and vendors to choose from to ease the customer journey. Another great example is using Starbucks ‘ app to pay for your daily coffee. The app lets consumers order and pays from their phone, plus it rewards its customers with rewards for usage, which they can redeem at the next visit. It is all about ease of use for consumers, and for the business, it is all about enabling quicker, easier payments for its consumers. Investors interested in learning more about this trend and identifying possible leaders need to understand the business models, how the fintech players make money, and how to take advantage. That’s according to Matt Harris, a partner at fintech investor Bain Capital Ventures.

Solution providers

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How Fintechs are becoming part of the embedded finance revolution?

They use APIs, SDKs, and connectivity like BaaS as part of their technological infrastructure. They enhance or revamp an existing solution while BaaS providers rent out their core infrastructure to power the services. Up until now, most companies have turned to fintech startups for these solutions. New ventures like Weavr, mmob and Hydrogen are just three companies that have secured funding over the years by empowering users with the help of APIs. This is a break from how these services have been provided in the past.

United States hold the biggest portion in the embedded finance market. Better ROI and latest monitoring services attached to the digital lending is making the processes smooth and easy for borrowers as well as lenders. The use of these services has increased lately due to the transformation of each sector and the fourth industrial revolution, also known as industries 4.0.

This creates a brand-new way of financial services distribution and new opportunities for tech companies to influence and improve the financial lives of businesses and consumers. Shopify is also offering similar embedded banking services for its business accounts. Shopify’s goal is for businesses to use their Shopify accounts instead of their bank’s checking and savings accounts to operate their business. By doing this, Shopify can further deepen its relationships with its businesses. Like all new concepts, for those just becoming acquainted with the idea, it can be challenging to get a grip on what this term means.

Embedding payment APIs in the ecommerce platform comes with a dual advantage of delivering superior payment experience and understanding customer payment habits. In addition, financial interaction between the players will be well-synchronized, leading to faster checkout and settlement processes. Embedded finance has now become a buzzword as it offers businesses new revenue streams and elevates customer experiences.

The potential for embedded finance in healthcare is huge, especially in the U.S. where many patients have to pay out-of-pocket for medical expenses. Both give consumers more options to pay – and now the trend is making its way into the B2B side of the food and beverage business. B2B marketplaces made just for construction make it easy, providing a wide range of choices for buyers and sales opportunities for suppliers. They also enable service providers to easily respond to RFPs without leaving the experience. Marketplaces dedicated to the unique and varied needs of this industry are now offering the opportunity to easily comparison shop for heat exchangers, drill bits, piping, and other materials. And suppliers get the chance to target qualified buyers, grow their market share, and make more sales through an additional revenue stream.


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