{"id":41780,"date":"2022-06-10T19:30:56","date_gmt":"2022-06-10T17:30:56","guid":{"rendered":"https:\/\/intellias.com\/?p=41780"},"modified":"2024-06-21T11:55:33","modified_gmt":"2024-06-21T09:55:33","slug":"embedded-finance-and-financial-services-from-tech-companies-market-briefing","status":"publish","type":"blog","link":"https:\/\/intellias.com\/embedded-finance-and-financial-services\/","title":{"rendered":"Embedded finance and financial services from tech companies: Market briefing"},"content":{"rendered":"

Every business deals with money, but few retain ownership of consumers\u2019 financial experiences. Traditionally, banks and payment facilitators were the ones to handle all the money matters: setting transaction fees, deciding on lending terms, issuing cards. Until they were removed from this pedestal by embedded finance and financial services from tech companies.<\/p>\n

What is embedded finance?<\/h2>\n

Embedded finance is a technological approach to incorporating financial products (like lending or insurance) into another type of product at the customer\u2019s point of need.<\/p>\n

Think of embedded finance and financial services as a savvy upsell, contextually prompted by your brand when your customer needs it most; for example, offering buy now pay later (BNPL) financing at checkout, or allowing customers to pay for fuel straight from the car dashboard.<\/p>\n

Right, but isn\u2019t that payment integration? Yes and no. Unlike standard integrations, embedded systems in finance ensure continuity in the customer experience (CX). There are no redirects to a standalone checkout page hosted by a third-party payment provider or extra account sign-up steps.<\/p>\n

But more importantly, embedded financial technologies allow you to retain full control over the customer experience, customer data, and ultimately profits. Your financial offering can be fully on-brand: closely aligned with your other products and services and managed in the same way.<\/p>\n

\"Embedded<\/p>\n

Settling a bill, ordering delivery, paying for parking \u2014 many of our money-related actions are streamlined thanks to frontend transformations in digital banking.<\/a><\/p>\n

But many other issues keep needling us. Think about small frustrations like forgetting your card when walking into a store or eying up a vending machine that only accepts coins (which of course you don\u2019t have). These are minor things that derail us from making a purchase.<\/p>\n

At the same time, bigger annoyances deter consumers from buying: lack of straightforward financing for a big-ticket item like a car, or the need to open a business banking account<\/a> in person to join a new freelance platform. Such things delay or dissuade a possible sale.<\/p>\n

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Embedded finance can meaningfully improve the customer experience and unlock a huge market opportunity, with an estimated $230 billion in net new revenue by 2025.<\/p>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t <\/span> Plaid x Accenture<\/span><\/span>\n\t\t\t\t<\/small>\n\t\t\t<\/blockquote>\n\t\t<\/section>\n

Embedded finance gives brands an opportunity to overcome objections, annoyances, and hindrances preventing consumers from buying. By embedding a financial offering into your core product, you can remove another cognitive chasm on the customer journey and make it easier for customers to transact with you.<\/p>\n

That\u2019s exactly what modern connected consumers want \u2014 seamless, contextual access to the right offers at the right time.<\/p>\n

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Learn more about connected customer needs<\/p>\n

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What makes embedded finance and financial services a promising avenue for revenue diversification?<\/h2>\n

To better understand the value behind embedded finance business models, let\u2019s look to another FinTech trend \u2014 open banking.<\/p>\n

Open banking<\/a> is a regulatory and technology movement promoting the sharing of customer transaction data with any third party. This has enabled two shifts in the financial sector:<\/p>\n