Updated: Jun 13, 2022
Embedded Finance is a great solution either standalone or as a CEX (Customer Engagement & Experience) tool. How is it a CEX tool can be understood by simply taking a closer look at what Embedded Finance itself is.
What is Embedded Finance?
Embedded finance is the integration of financial services, such as banking, insurance, or lending, into traditionally non-financial user experiences. It occurs when a non-financial provider integrates financial services into its offerings to enhance customers’ experience and retain them. An online store offering insurance services for goods sold or a ride-sharing app offering banking services are just a few examples of its widespread use.
What is the Market Opportunity?
The embedded finance market size reached $43 billion in 2021, and it’s expected to grow 215% to exceed $138 billion by 2026. It’s a remarkable growth pace - even in today’s extremely fast environment.
The Indian Embedded Finance market is currently valued at $31 Bn and is expected to grow to $84 Bn by 2025, at a CAGR of 22%. The Fintech transaction value size is set to grow from US$ 66 Bn in 2019 to US$ 138 Bn in 2023, at a CAGR of 20%.
Embedded finance’s extraordinary growth will be driven by the increasing availability of APIs from financial services providers. As these APIs provide easy integration of financial services into non-financial ones, they lower the entry barriers and create a source of revenue for embedded finance providers.
Different vertical services can easily be combined to satisfy customers’ exact needs, thanks to the development of API models. For example, to take care of company mission to have a single platform for all the needs viz. payment, billing, loyalty, cashback, campaign and CRM, Fintech companies have developed a Cloud-based white-label tech platform designed to fuel user retention and customer revenue. Revenue share SaaS business model for high-margin rapid growth with incentives for consumers.
Why Embedded Finance?
As one of the most regulated industries, banking services have been a constant pain point for customers. In the near past, people had to contact different providers for each step of the purchasing journey, including payment, insurance, or getting loans, which took days to months. If they wanted to make a substantial purchase, for instance, they had to apply for credit in a physical bank branch.
Today, they can easily access a wide range of financial services from the point of service on a single uni-platform as they are making the purchase. In this way, a huge pain point has been lifted, making the customer more likely to buy more in size and frequency, which means increased customer satisfaction and profit.
What services Embedded Finance Provide?
Embedded Finance provides a uni-platform for products and services to enable any company and brand to offer plug-and-play-ready Financial Services directly to their customers. Without the need to acquire a banking license, build up complex technology or expertise for providing Financial Services and Products.
Enterprises can reduce their churn while increasing their revenues and user value.
Embedded finance taps into huge and long overdue pain points of users in all industries by combining both financial and non-financial services in a single touchpoint. For businesses like Neo banks, NBFCs and Non-Financial Services, this means an unprecedented profit opportunity.
Any service that addresses the pain point of the end user is a good CEX tool. So Is the case with Embedded Finance.