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  • Cecilia Escobar

Embedded Finance: Transforming the Financial Experience for Businesses and Consumers.

Embedded Finance (EmFi) is reshaping how we interact with financial services daily, providing convenience, efficiency, and a more user-centric experience. With a projected $7 trillion globally, this phenomenon is poised as a game-changer in the global financial landscape.

What does Embedded Finance mean?

Embedded Finance transforms the dynamics of businesses and consumers, changing how they interact through financial services.

Consumers play a pivotal role in this transformation with their day-to-day activities, such as ordering takeout, paying for online training, or buying a book online.

McKinsey defines Embedded Finance as placing a financial product into a non-financial customer experience journey or platform. It's a buzzword in Fintech, also known as a disruptive force in financial services.

According to data from The Fintech Times, the integrated finance industry will be worth $7 trillion globally.

Why do we need Embedded Finance?

With the constant growth of digitization in the world, there's a need to solve customers' online needs quickly and securely.

Embedded Finance integrates any financial service or product into a non-financial environment.

Corporates and SaaS see value in using a single provider for all their financial needs instead of using separate providers. Embedded Finance is hailed as a 'game changer' for driving eco-conscious behavior.

Types of Embedded Finance

Embedded Payments

A method of securely linking and storing payment information for easy access and use with a single touch. They are widely considered the standard for integrated financing and have been adopted by individuals who have transitioned to digital platforms and those who have grown up with technology.

Embedded Buy Now, Pay Later Installment Plans Previously, stores offered layaway plans, where customers could make a partial payment on a product they wished to purchase, and the store would hold the item until the buyer could pay the total amount. Today, there is the option of "buy now and pay later," where customers can take possession of the product and pay for it in convenient installments, often facilitated by mobile payment options. Embedded Card Payments Smart cards, virtual cards, or spending cards allow end users to quickly transfer funds electronically and make purchases up to the total cash value on the card. These cards offer a secure option as all user information is encrypted. There is a vast array of platforms that offer such cards. Embedded Lending The process of obtaining a personal loan is made simple with this option, as no extensive underwriting procedures or inquiries into one's credit score are required. Users can quickly and easily access loans with a single click, bypassing the need for intermediaries and avoiding lengthy processes. This simplifies the process and reduces the reliance on third parties. Embedded Investments Many individuals need to become more familiar with finance, let alone investing, and may feel overwhelmed by the complexity and perceived risks. Integrating investment services simplifies the process, allowing users to invest quickly and confidently in various markets, such as stocks and retirement plans. By offering a user-friendly experience, individuals are empowered to take control of their financial future. Embedded Insurance A seamless and integrated solution to insurance needs within the payment experience. Some companies have already implemented this feature, streamlining the process of obtaining insurance coverage for various activities, from shopping to travel. With embedded lending, there is no longer a need to rely on third-party insurance agents, making the experience more efficient and convenient.

Figures and Trends

  • The projected value of $7 trillion globally indicates embedded finance's massive reach and growth potential in the global economy.

  • According to McKinsey, integrating financial products into non-financial experiences redefines customer expectations and how businesses deliver services.

  • The adoption of embedded payments, with a $7 trillion standard, reflects rapid consumer acceptance and trust in these solutions.

Conclusion Embedded Finance is triggering a revolution in how we interact with financial services. From payments to investments, integrating financial products into our daily activities offers convenience and efficiency. With a projected value of $7 trillion, these embedded finances are a reality and poised to be a driving force for change in the global financial landscape. As technology evolves, we can expect an even more significant expansion of Embedded Finance, further redefining our relationship with money and financial transactions.

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