What is embedded finance?

Shaily Shah
December 16, 2022
800 Mins
What is embedded finance?

Embedded means integrating a feature/service deeply into another platform. This concept is designed to consolidate all the financial processes for easy
consumer journeys and better user experience. A simple example of this would be: Embedded finance enables customers to purchase, make payments and get
credit in one place.
As consumer wants the services to be easier and quicker, and the companies want the payments quicker or the services they want to launch to be faster, embedded finance allows this ability to lend, accept payments, offer insurance, and provide investment options on their platform without any integration with traditional financial institutions.
Embedded finance saves a lot of time for companies looking to launch financial services as they do not have to partner with multiple vendors in the eco-system to launch those services. They just need to partner with one embedded finance company that provides the service they are looking for. The embedded finance company does all the heavy lifting on their behalf.

Types of Embedded Finance

Embedded Payments: Embedded Payments enable payments at a click of a button. This means that the consumer using any app to make a purchase can make payments without switching between apps. This makes the payments settlement and checkout process very quick. For example, Many food delivery
apps and ride-sharing apps have integrated payments on their platform which creates a seamless payment flow on their platform.
Embedded Investments: Embedded investments allows fintech, banks, and consumer-facing companies to launch investment products as a part of their
offerings. Embedded investment allows investors to invest in investment products without leaving the platform they are on. Embedded investing also
makes the process of launching investment offerings very quick and easy.

Embedded Lending: Buy now pay later is a part of embedded lending. Consumer-facing apps have enabled lending right at the point of purchase. Due to this, customers do not have to go to the bank every time they want to make a big purchase. Also, it eliminates the lengthy process as well as extensive paperwork and ultimately saves time.

Embedded insurance
: Embedded insurance is a type of insurance that is included as part of another product or service. For example, a company that sellselectronics may offer a warranty that includes insurance to cover accidental damage to the device. This can be seen as a form of embedded insurance because the insurance is included as part of the warranty, rather than being offered as a separate product. Some other examples of embedded insurance include credit card insurance, rental car insurance, and travel insurance that is included as part of a travel package.

Embedded Banking: Embedded banking is a type of financial technology that allows companies to offer banking and financial services to their customers directly from within their own products or services. For example, a company might offer its customers the ability to open and manage a bank account or make payments directly from within its own app or website. This can make it easier for customers to access and manage their finances and can also help the company to offer a more seamless and integrated experience to its customers.Embedded card payments: Besides making payments from debit cards and credit cards, you can makepayments via embedded cards. Embedded cards allow the users to transfer the funds electronically to the card and the user can make purchases up to the total amount loaded on the card. These cards are cost-effective and enable faster processing than traditional cards.

Embedded finance refers to the integration of financial services into everyday products and services, such as retail products or online platforms. This integration has the potential to improve the way that people access and use financial services, making it more convenient and accessible. This helps drive innovation and competition in the financial industry, which leads to better financial products and services for customers.

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