Embedded finance is a new trend that allows you to plug additional financial or insurance services into your existing business. What exactly does it involve? What are its advantages? Answers to these and other questions are found in this article.
What is the embedded finance trend?
Embedded finance is a new trend in the market that involves embedding financial or insurance services into products or services that have been offered by a company until now. As a result, it is not only possible to establish an even deeper relationship with customers, but also to make them dependent on your company, which translates into increased loyalty. Of course, embedded finance is a trend that can be applied to many industries, and examples of such solutions are described in a later paragraph. It can also certainly be said that it will grow in popularity over time, which is primarily due to its benefits.
Embedded finance – advantages
Embedded finance is a strategy that has many benefits when implemented. Moreover, both the company and its customers benefit. This is because a company taking advantage of the embedded finance trend not only gains new sources of income, but also increases the attractiveness of its offer, which translates into attracting new customers. The result is both significantly higher profits and higher levels of customer loyalty, which is key in business. From their point of view, however, a better shopping experience, as well as more attractive financial terms, can be seen as a benefit. Both aspects are very important when making purchasing decisions, which makes the customer choose the brand that offers not only the best price, but also tailored conditions or additional services. It is also worth noting that the use of embedded finance, i.e. sewing banking or insurance products into the core business of a company, is beneficial for the client because it allows him to comprehensively deal with a given issue using the services of one company.
Embedded finance – examples
As mentioned embedded finance is a new trend that is gaining popularity very quickly. As a result, there are more and more examples of this solution, including Orlen Pay application that allows you to pay for fuel at the station without going to the store. Not only is this a convenient and quick solution, but it is also an initiative that, in the age of pandemics, could in many cases determine the choice of a particular station for safety reasons. Another example of sewn-in payments could be the app used by Uber, which allows you to settle your fare easily and quickly. The Starbucks app works similarly, allowing you to not only order coffee and pay for it without waiting in line, but also earn loyalty points that attract customers permanently.
It’s worth being aware that the embedded finance trend is thriving not only in payments, but also in the loan and credit market. Until not so long ago, to get one you had to go to a bank and apply for a loan or credit card. Nowadays, you can directly make purchases on credit using, among other things, the deferred payment mechanism. It is very popular on Allegro, wherewith Allegro Pay you can make purchases on credit and pay back the loan in a convenient way.
The development of the embedded finance trend is an opportunity for new companies that can specialize in this type of business. As a rule, it is a fintech that, as a technology provider, can operate under the BAAS formula, or banking as a service. Unlike the SAAS model, or software as a service, it is not entirely responsible for the solutions provided.
In conclusion, embedded finance is a trend that provides businesses with additional opportunities to earn and attract customers, which means that its popularity will steadily increase. Moreover, this does not apply to the distant future but occurs now.