Remember the financial era when we used to make payments and it would take days or at times weeks also to get cleared from the bank’s side, it was frustrating, right! There has been a phase when the suppliers or businesses used to wait for weeks and months to get paid as the payment would be stuck somewhere in between the channel.
This has hampered the global economy as there was not enough capital available to keep the market going, to keep up the production, and the businesses. The entire working capital system has been going down with this slow and non-efficient payment system, in both B2B and B2C worlds.
A better functioning system to process the payments on time, and streamline the lending, insurance, and other financial services have been required as a solution for this slow payment processing and decaying capital market. This solution is what we now recognize as Embedded Finance or Embedded Banking.
An embedded finance service integrates all financial solutions into a business’s infrastructure to restructure and modernize the financial services without redirecting the customers/clients to any third-party destinations or payment portals.
We can also understand this with an example- you need to reach a café and you have booked a cab using the Uber app, now once reached you are required to pay the cab driver and you have two options- pay in cash or make an online payment. Online payment is convenient, and you used the Uber app itself and made payments using the Uber wallet- this is what embedded finance does.
This helps to enhance the global economy and your business by elevating the payments and keeping them on track as well. This ensures a better customer experience and higher revenue for the business as the customer is not deviating to any other third-party payment partner.
Embedded finance has solved one of the biggest roadblocks in the growth of SMEs by handling the situation of slow payments and enhancing the growth and recovery of this sector. All this has been possible due to the integrated approach of this platform which has embedded all forms of payments into one portal (app or website) itself. For the B2B industry embedded finance has helped in developing this robust network for trading and made commerce easy.
The embedded finance can be integrated into different segments such as P2P (Purchase-to-Pay), Enterprise Resource Planning (ERP), and other payment processing to elevate the payment structure making it simple and convenient for the supplier to receive the payments in less time.
Embedded finance is not just limited to these benefits only. It has contributed to much more in the finance industry and has given rise to some trends which can be seen in the market easily, some of these trends are: Buy Now Pay Later (BNPL), Integrated Insurance Services, Investment and Trading, Point-of-Service lending, and FinTech-as-a-service (FaaS).
All these trends can be easily observed in the market and are gaining attention as they are working towards providing a better and enhanced embedded finance service for the consumers. Further about embedded finance will be continued in the upcoming blogs of the series. We will be covering some aspects such as key players of embedded finance, its uses, and its types. However, this won’t get limited to just this, we will be exploring further than this as well.