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Is Embedded Finance The New Big Thing In Financial Services?

Amidst the ever-growing number of payment options in an increasingly competitive marketplace, small retailers face a formidable challenge. Can embedded finance be the answer?

Businesses of all sizes face numerous challenges - rising inflation, complex hiring, and the economy appears to be more uncertain than ever. Meanwhile, the proliferation of digital technology has provided consumers with unprecedented choice, but, as discussed in post-COVID finance events in the USA, it has also created a massive headache for retailers, particularly regarding payments. For some, managing multiple payment providers may be the proverbial straw that breaks the camel's back.

Fortunately, there is an answer in the form of embedded finance.

Embedded Finance - What Is It?

Embedded finance brings all financial services to one location - rather than working with separate entities. It provides a safe, simple, and efficient way to combine all the benefits a retailer may use into a single, easy-to-manage model. Financial solutions can be integrated into a company's infrastructure, streamlining access to financial services like lending, insurance, and payment processing without redirecting users to third-party websites. It means fewer apps to manage, fewer people handling money, fewer things to worry about, and less time spent on financial management.

In recent years, there has been a surge in interest in this industry. The embedded finance market in the United States reached $22.5 billion in 2020 and is expected to be more than tenfold to $230 billion by 2025. Much of that expansion will occur in the payments sector, where customers' expanding options pressure retailers.

Dealing with multiple financial partners is becoming increasingly difficult for retailers. The problem is exacerbated for relatively small or growing businesses. Customer expectations have increased, and they expect levels of convenience and choice, including payments and financial services. These expectations have risen because digital technology has increased the number of payment options available. However, customers don't see the amount of work that makes these services available.

Embedded payments, such as embedding payments at the touch of a button, can make life easier for all parties. Customers are able to pay automatically through an app at the end of their purchasing journey rather than entering credit card information for each transaction. Meanwhile, digital wallets can enable contactless mobile transactions.

In addition, other types of financial services, such as lending, can be embedded in non-financial products. Rather than comparing different providers, a lending option can be accessed at the point of sale without the customer having to go directly to any bank or lender.

In much the same way, insurance can be added to a purchase later with a single click, eliminating the need to contact a provider or broker. For example, it can be used when purchasing electronic goods, with optional insurance included in the purchase.

Making It Happen

Existing technological systems are not designed to handle the real-time functionalities required by embedded finance products. Although it is possible to upgrade IT, it is time-consuming and costly, and it is a cost that most small and medium-sized businesses cannot afford. However, specialized companies can provide embedded finance features more straightforwardly and cost-effectively.

However, upcoming finance conferences in Vegas will discuss how embedded finance complements retail, hospitality, banking, telecommunications, communications, and digital services. It allows us to integrate financial services into every service aspect, from e-commerce to the point of sale.

For our customers, this means fewer apps to manage, fewer people handling their money, and less time spent keeping track of financial details. It transfers much of the complexity that digital payments services can bring to this landscape into a much more streamlined and simple-to-understand package.

What To Search For?

It is critical to work with a partner who can handle all of your payment and processing services while providing the benefits of digital technology without the complexity. A perfect match would be a platform that understands not only cutting-edge technology solutions but also the industry you work in and is in an ideal position to understand the challenges businesses face in your industry.

For instance, the Money 2.0 Conference. brings you to institutions that design tailored-made solutions that solve your specific problems and come with high-quality technology, extensive experience, and exceptional service.

08/19/2022 - 13:02
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Lakshay Mohanpuriya
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Lakshay has always been drawn to the world of finance. His fascination for it led him to join the organizing committee for the Money 2.0 Conference - an annual conference exploring FinTech trends, showing how to best manage one's money, identifying scams/fraud and fake investments spam, as well as highlighting ways to stay safe.