Embedded Finance: Everything You Must Know

by Tech Geekk writer

A modern union of conventional financial services with non-finance offerings, embedded finance is quickly becoming quite the rage in the market. This is because such services help customers save time, offer immense convenience, offer significantly better quality of services, etc.

Embedded finance is today transforming the financial services distribution model. They are financial services provided on the customer's terms, at any time and from any place. It allows the end clients to perform banking transactions without having to visit the physical bank premises. In certain circumstances, it can completely replace the traditional bank while encompassing banking and financial services.

Let us discuss these benefits in some more detail before we move on to other important aspects of embedded finance.

Better customer experience: Embedded finance enables services without needing customers to deal with third-party vendors, etc., thus driving better sales.
Leverage existing resources: Instead of worrying about the investment necessary for the acquisition of new customers, companies can make use of embedded finance to leverage their existing systems across the entire ecosystem to generate better profits and deliver improved customer experiences.

Time to take a look at the main factors that are driving embedded finance.

Access to consumer data: Love it or hate it, the fact remains that today people share their personal information on the internet and willingly at that. This easy access to such data allows companies to understand their customers’ behavior better and use such insights to offer better products and services.
Change in consumer behavior: New-age customers prefer online shopping, which demonstrates they have immense trust in these services. Furthermore, these customers are unlikely to shift away from these preferences provided there are not subjected to scams or their data is not compromised.
Growing competition: It is no secret that any new technology that a company adopts will eventually be adopted by the company’s rivals as well. As more and more companies increasingly use embedded finance, they will also seek to deliver better customer experiences to beat their rivals, thus driving even more companies to adopt such technologies, improve operations, etc.

We are not done yet though; allow us to also demonstrate how embedded finance makes use of avant-garde technologies such as AI and ML.

Artificial intelligence and machine learning are helping FinTech companies process truly humongous amounts of data to facilitate efficiency and accuracy in their operations.
While embedded finance is conducive for streamlined performance, but the manual programming it necessitates can prove to be a roadblock. AI can, then, analyze data across the industry to help companies deliver ace solutions for customers.

Finally, let us also take a look at some distinctive use cases of embedded finance:

Ridesharing: The world of quick ride-sharing services also stands to benefit from embedded finance tools and technologies, using them to easily make payments, integrate digital wallets, etc.
Payments via QR codes: Companies can easily accelerate payment processes for their customers via the use of QR codes, which can be quickly scanned via smartphones and send payments directly into the recipient’s bank account.
Real estate purchase: This tool can help save all parties involved in a real estate transaction from a mountain of paperwork, thanks to documentation assistance tools and processes that can be easily integrated into real estate business processes.

The rapid financial digital transformation in the world around us is no longer a distant dream. It is, in fact, a reality — a fact that modern companies would do well to leverage to their benefit. How? Well, as the above discussion demonstrates, via embedded finance, of course.