Blogs

Embedded finance

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Embedded finance is the tie-in of financial services into a usually non-financial platform. When businesses in the MSME, B2C, and B2B segments avail the use of embedded credit, it enables them to increase their customer lifetime value, monetize their customer base, and vertically scale their product offering.

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Embedded finance is, in a very basic sense, the integration of financial services into a non-financial service. It enables customer-centric digital platforms to embed financial services into themselves. 

Some examples of embedded finance are:

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• Embedded Payments

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Embedded payments make it easy to complete payments with just the touch of a button. It means quicker checkouts and settlement processes, meaning a hassle-free experience for the user. 

Example: Razorpay

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• Embedded Card Payment 

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There are many platforms and vendors that now offer virtual or digital cards that users can make quick payments with. Users can electronically transfer funds onto the card and use it to make payments. 

Example: PayPal

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• Embedded Insurance

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The process of embedded insurance cuts out the middleman, which was traditionally needed to make insurance payments. Companies are now offering customers the chance to buy insurance that is embedded into the purchase itself. 

Example: Tesla

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• Embedded Investments 

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As the process of investment may seem complicated to the average person, embedded banking programs have now risen which helps to embed the investment process into the application. The application takes care of all the steps of the investment process for the user. 

Example: Acorns

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Some of the important players in the embedded finance ecosystems are: 

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• Digital Platforms 

• Financial Institutions 

• Embedded Finance Infrastructure Companies

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Embedded finance is an excellent way for businesses to increase their customer base, as the user has a very seamless payment experience, which in turn leads them to making more purchases than usual. 

Two of the existing names in the market that can look to add value by implementing this are: 

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• Urban Company

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With an embedded credit option, users will be encouraged to go ahead and book/use their services more often than usual, since they are being given the option to pay at a later date and not immediately. 

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• Banks 

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Banks can begin to implement embedded credit options into their banking applications, which will allow the users to avail small amounts of credit in very quick turnaround periods. 

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One of the biggest trends that have risen in the embedded finance market is the Buy Now, Pay Later practice. 

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To keep track of your lending practices, Encore 360° offers Encore Lend, which is a fully-integrated lending management and core accounting suite. From customer on-boarding to loan repayment, Encore Lend is the product to satisfy all your lending requirements.