What is Embedded Finance?

Embedded finance is a core value proposition for modern fintech, and it's easy to see why. By integrating into already established platforms, such as different banking applications, this customer-centric solution provides one central hub for managing your core service and other amenities, such as insurance, credit cards, and payments. With other unicorn tech companies and fintechs adopting these services, embedded finance appears to continue to grow considerably. So, what is embedded finance? Let's take a look.

What is Embedded Finance?

Embedded finance is a term for integrating banking and other financial services into non-financial services and applications. This refers to banks and fintech companies integrating their product into other software - and vice versa. For example, a bank may provide insurance services where customers can manage multiple payments using the same application. Similarly, credit card offers on established platforms are also considered embedded finance.

Examples of Embedded Finance

Payments

A very lucrative sub-industry of embedded finance, the payments industry integrates into most modern fintech. A typical example includes e-commerce for payment processing; the payments industry stands as the backbone of processing payments for financial services. Some of the biggest companies in the payments industry are PayPal and Visa.

Loans

Another common sub-industry of embedded finance is loans. Similar to banks, the loan industry will always be an essential resource in the modern day. Needless to say, by lending money to customers, customers will pay back their loans with interest. The loan industry typically integrates into any software where big purchases are made, giving the customer the option to pay over time- which we won’t go into the details in this article. One of the biggest companies currently is Affirm.

Insurance

The insurance industry is the service we pay for but hope to never need. This industry is another core value of fintech, as it typically integrates into software where the product purchased has a high ticket value. Insurance companies encourage reliability, which they incorporate into opportunities such as car purchases. One of the biggest insurance companies is Aflac.

Benefits of Embedded Finance

While it's easy to see how integrating into one central hub can benefit customers, embedded finance development has significantly improved everyday services. Some of the benefits of embedded finance are as follows:

• Accessible products and services
• New opportunities for emerging fintech
• More avenues for customer-centric solutions

Conclusion

When looking at what is embedded finance, it's essential to note that it's prevalent everywhere in modern technology. From payment processing to insurance offers, the concept is to keep everything centralized and give customers the convenience of technology. As embedded finance continues to evolve, it will undoubtedly play a pivotal role in the growth and transformation of fintech, providing more seamless, efficient, and customer-centric solutions in our daily lives.

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