Embedded finance offers convenience, allowing users flexibility and greater accessibility.
It enhances flexibility by merging multiple services in one platform, allowing users to make purchases, pay bills, and perform peer-to-peer fund transfers in one place.
Despite the convenience it offers, adoption still faces challenges. This article discusses the main opportunities it brings and the challenges it faces.
Opportunities
The advent of embedded finance has brought about new opportunities; they are, among others, as follows:
Supporting growth of financial technology
Embedded finance is a significant booster for the growth of the financial technology sector. Traditional finance has struggled to reach traditionally unbanked communities. By making finances integrated into non-financial apps, these communities can now access financial services.
Promoting peer-to-peer transactions
While the integration of financial services into non-financial apps is important, one of embedded finance’s most important functions is facilitating seamless peer-to-peer transactions.
Increasing payment channels
Embedded finance allows companies and services to accept payment from more channels, allowing them to expand their reach.
Focus on customer experience
Embedded finance has an emphasised focus on customer experience. By integrating multiple financial services into one platform, customers can now access them with ease.
Challenges
As embedded financial services are still in their early stages of development, they face several challenges.
Complexity in integrating multiple services
Integrating multiple services entails some technical complexity.
Regulatory challenges
A platform integrating multiple financial services into one platform might have to navigate diverse regulatory challenges that bind to each service, not to mention the challenges that come from the partnerships with the service providers.
Risk management
By integrating multiple services into one platform users are at an increased risk of having their accounts and data compromised.
Notable Embedded Finance Platforms
Multiple successful embedded finance platforms have emerged in various countries. For example, there is Alipay in China, GoJek in Indonesia, Plaid in the U.S., and Adyen in the Netherlands.
These platforms all owe their success to the same factors. These are user trust, widespread adoption, security, innovation, and an extensive network of partners.
User trust stems from data security. Embedded finance platforms employ tools such as encryption and secure API designs and ensure security compliance to secure user data. Then, they also have extensive networks of partners, ensuring the comprehensiveness of their service offerings.
Due to the convenience they offer, embedded finance enjoys public support. It provides opportunities for companies and services to reach more users. That said, embedded financial services also face challenges such as cybersecurity.
- Embedded Finance
