Simon Ellis, Head of Operations, EMEA at the global payment platform Airwallex, with his key FinTech predictions for 2025
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This past year has truly solidified FinTech’s role as an indispensable part of the financial landscape. From the sleek banking apps that have become a daily staple for millions to the invisible financial infrastructure powering seamless payments… FinTech is no longer just a buzzword – it’s the new norm. It’s not just about innovative startups anymore. It’s about how traditional financial institutions are embracing and integrating these technologies to stay relevant and meet the evolving needs of their customers. In essence, FinTech has become synonymous with modern banking, driving continuous innovation and transformation across the entire industry.
But what’s next? 2025 promises to be transformational in many ways. Businesses are accepting AI as the reality of our future. Consumers are becoming more accustomed to flexibility and choice. And now more than ever, both seek agile and seamless solutions for their financial needs.
Here are the trends we at Airwallex expect to see play out over the next twelve months:
Coopetition with traditional banks and FinTechs
Coopetition will become a firm reality in 2025. Many of the conventional fears associated with FinTechs will no longer be a salient presence. Increased collaboration between FinTechs and banks will facilitate further innovation on a mass scale. These giants will insert themselves into new industries and access a new generation of customers. The prerequisite for this is the correct compliance and controls but firms are committed to getting this right to ensure they maintain the right to operate.
A path to Hyper-Personalisation
Over the past year, we’ve witnessed the emergence of an increasingly educated payments buyer, mindful of what they need today and into the future as they scale. In 2025, we’ll see payment providers take more direction from their customers. Payment providers will need to be more flexible as merchant customer preferences shift.
For ambitious and progressive businesses, particularly those looking to operationalise in new markets at pace, convenience remains king. Navigating multiple vendors can quickly create friction. However, this is where FinTechs bundling their solutions comes into play. Having a single point of contact that provides a range of services – whether that’s foreign exchange (FX), multi-currency digital accounts, expense management or payouts – isn’t just about convenience. Moreover, it saves on crucial costs that can be reinvested back into the business to spur growth.
The days of taking a one-size-fits-all product approach will no longer suffice. Hyper-Personalisation will reign supreme as businesses fight for customer attention and brand loyalty.
The continued rise of Embedded Finance
In seeking to accommodate the growing need for flexibility, the year ahead will see Embedded Finance become more commonplace across a range of industries. Consumers have most likely all experienced the seamless process of making an embedded payment, whether it’s ordering through a food delivery app or paying for a ride. Usually, it’s through digital-first services, but 2025 will be the year that we see more traditional industries embrace embedded payments to keep pace with the broader innovation taking place in their sectors. This will also help businesses stand out in an ever-changing and overcrowded market. Embedded Finance will help end users maintain their dominance while also driving product stickiness.
AI is here to stay
To accelerate this transformation, 2025 will see FinTechs and banks persist in the use of AI to improve decision-making and customer engagement. AI is already being used to automate and expedite previously long and complex processes. For example, Generative AI (GenAI) will continue to help financial institutions enhance the speed and efficacy of know-your-customer (KYC) and customer onboarding processes. Furthermore, at the same time, it will detect unusual activity and fraud. We’ll also continue to see a focus on AI’s use to improve the ongoing customer experience with personalised insights and advice.
As a result, modern financial services will become more accessible to businesses of all sizes and across sectors. Allowing for easier and more cost-effective management of global operations.
Alex Mifsud, CEO of Embedded Finance platform Weavr, on the outlook for Banking-as-a-Service (BaaS)
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If any FinTech trend is painfully making its way through the archetypical Gartner hype cycle, it is Banking-as-a-Service or BaaS. At its core, BaaS is an API-driven platform enabling third-parties to develop financial products that make use of the banking and payments capabilities, and the regulatory permissions, of financial institutions that offer it.
This means non-regulated businesses can, in effect, make financial services available to customers without having a banking or financial licence themselves. The bank gets to monetise their licence efficiently, while FinTechs bring ingenuity, market insight and usually, superior digital experiences to customers. It sounds wonderful in concept, but the reality is far more complex. The recent collapse of Synapse, a prominent BaaS provider, as well as the sheer number of regulator interventions across many developed world economies, has highlighted critical vulnerabilities in the BaaS model.
The BaaS Model
While no one, including regulators, seems to be denying the opportunity to create customer value, it is increasingly evident that the BaaS model as it has developed over the past five years will not survive in its present form. There are several evolutionary directions that are being talked about for BaaS, even if not yet established. Here, I would like to present a specific variant. The European regulatory model not only makes this possible, but also presents a strong win-win opportunity for banks to collaborate with non-bank financial institutions like e-money institutions and payment institutions (I’ll use the acronym “EMI” to mean either of these). In this model, banks get access to the benefits of BaaS with minimal exposure to the now-better-understood risks. Moreover, EMIs get access to the powerful capabilities and economics that are the sole preserve of banks as deposit-taking institutions.
These collaborations – in effect, a multi-tier approach to BaaS – should offer safer exposure to Embedded Finance for banks. And richer capabilities available to embedders, and ultimately, end-customers.
Antipattern Matching
Recent announcements that Clearbank, a digitally-savvy clearing bank now promoting itself as an embedded finance platform, has hit profitability is a welcome tonic to investors despairing of the stream of bad news hitting BaaS players in the US and Europe. Even JP Morgan, one of the most respected global banks, has shown that size is no obstacle to ambitious, or even radical, innovation, as it also offers Embedded Finance. And at the other end of the size scale, Griffin announced earlier this year that, having secured a banking licence specifically to offer BaaS and embedded finance, it is now ready to start operating.
In the face of the mentioned challenges that EMI BaaS players have faced with regulators in Europe, some in the investment community have been proclaiming that, to do BaaS effectively, a financial institution needs to have a banking licence. An e-money or payment institution licence simply won’t cut it.
While such pattern matching and extrapolation is understandable, it is not necessarily correct, so let’s look at an alternative view: both EMIs and banks are viable financial institutions to support Embedded Finance, but each have strengths and weaknesses. Better still, by working together in a multi-tiered configuration, each type of financial institution can play to its strengths enabling the combination to deliver high capability, highly adaptive delivery models of Embedded Finance.
Banks doing Embedded Finance
While a banking licence does confer specific advantages – mainly, that deposit-taking provides one of the most attractive financing models for financial institutions to raise funds for lending – there are also disadvantages to being a bank compared to being an EMI. In the UK, for instance, banks need to hold more capital than EMIs, and perhaps more importantly, banks are supervised by both the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA), the latter of which does not supervise EMIs.
Navigating innovative operating models like Embedded Finance with two regulators can create greater risk aversion and therefore slow down or even discourage the experimentation that is required to find the right risk-value formula that works. We know from recent experience that getting the balance right between great customer value and sustainable compliant operations can be a delicate balance.
The Benefits
One way to square the circle is for banks to provide wholesale financial services to EMIs which then serve end customers on their own licences in turn. While this doesn’t completely insulate the bank from censure in the event that the rules are broken – for instance, if money laundering occurs – it does place the biggest share of the burden of the customer on-boarding and monitoring compliance on the EMI. Given that EMIs were created initially to support money-related activities for a digital world, it may be easier for them by working with a single regulator to achieve the right balance. It also allows large banks with cumbersome on-boarding processes designed for large corporations to get access, via the EMI, to a community of small and medium sized business customers that, in aggregate, represent meaningful business volumes for the bank.
There is a strong win-win in this kind of bank-EMI collaboration, especially for banks which are used to dealing with other financial institutions as customers. EMIs, in turn, can source a range of wholesale financial services from multiple banks: foreign exchange from one, and lending capacity from one or more others.
A New Pattern: Multi-Tiered Banking with BaaS
The future of BaaS lies in collaboration. A multi-tiered banking model allows institutions to combine their strengths strategically. Such a model not only optimises the use of resources but also enhances the value proposition of BaaS by incorporating the strengths of various financial entities. EMIs, with their ability to offer commercial cards, credit lines, and foreign exchange services, reduce the risk for larger institutions and open doors for broader innovation.
Benjamin Avraham, CEO and Founder at Okoora – the creators of Automated Business Currency Management, on Embedded Finance in global trade and the challenges of FX risk in global expansion
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Embedded Finance is rapidly emerging as a transformative force in cross-border payments, reshaping how businesses handle transactions across borders. By making payments more efficient and accessible, it is becoming a key tool for companies navigating the complexities of global trade. While the concept isn’t entirely new, its adoption has accelerated, with the sector projected to generate an estimated $230 billion in revenue by 2025.
Trends in Embedded Finance for Cross-Border Payments in 2025 and beyond
Embedded Finance is poised to reshape cross-border payments. It offers innovative solutions to address inefficiencies and create experiences with reduced friction for businesses and consumers alike.
A key trend is the integration of multi-currency wallets. These enable real-time currency conversion and support localised payment methods tailored to specific regions. This not only reduces transaction delays but also enhances accessibility for global users. At the same time, embedded risk management tools are gaining traction. These provide businesses with automated FX hedging options and predictive analytics to better manage currency volatility.
Super apps with embedded cross-border capabilities are becoming more prevalent. These offer all-in-one solutions for payments, investments, and FX management. These apps are especially impactful in promoting financial inclusion, allowing underserved markets to access cross-border payment systems with ease.
The Challenge of FX Risk in Global Expansion
For businesses aiming to expand globally and remain competitive, understanding and managing foreign exchange (FX) risk is paramount. Currency volatility, intricate markets, and hidden costs remain significant hurdles for companies operating internationally. Moreover, the solution lies in leveraging embedded currency risk management, which integrates FX tools directly into business workflows to streamline and mitigate these challenges.
Historically, small and medium-sized businesses (SMBs) have relied on traditional banks for cross-border payment services. However, slow, opaque, and cumbersome banking processes often fail to meet the modern demands for a frictionless experience. SMBs today require more than just service providers—they need trusted partners who truly understand their unique needs and can deliver tailored solutions. Embedded Finance levels the playing field by giving SMBs access to financial tools previously reserved for larger corporations, empowering them to compete effectively in global trade.
On a parallel track, larger players such as payment institutions, corporates, and banks are increasingly recognizing the potential of embedded finance to unlock new market opportunities and enhance the financial ecosystem. According to a recent report by Publicis Salient, embedded finance revenues are expected to grow by 40% annually in the coming years, underlining its critical role in the evolution of global financial services. This is encouraging organizations without in-house capabilities to actively seek partnerships with fintech providers to deliver integrated, relevant, and accessible financial services, while also creating new revenue streams.
Key features of Embedded Finance for Cross-Border Transactions
As businesses continue to navigate the complexities of cross-border transactions, Embedded Finance offers an array of powerful features that streamline processes, enhance efficiency, and mitigate risks. By integrating financial tools directly into business systems, companies can improve operations, reduce costs, and gain greater control over their international payments and currency management.
Below are the key features that make Embedded Finance a game-changer for businesses engaged in global trade:
Streamlining Payments
Frictionless Transactions: Embedded finance integrates payment processing directly into business systems, enabling businesses to send and receive funds across borders without needing separate third-party platforms.
Localised Payment Methods: It supports local payment systems, ensuring businesses can transact with customers and partners in their preferred currencies and payment formats.
FX Risk Management
Automated Hedging: Embedded tools can automatically hedge against currency fluctuations, reducing financial exposure and safeguarding profit margins.
Predictive Analytics: Advanced analytics help businesses anticipate and respond to currency market threats and opportunities.
Reducing Costs & Delays
Lower Fees: By bypassing traditional banking intermediaries, embedded finance platforms often reduce transaction costs.
Faster Settlements: Transactions are processed more quickly, enabling businesses to manage cash flow and working capital more efficiently.
Enhancing Transparency
Clearer Pricing: Embedded finance platforms provide real-time insights into exchange rates and transaction costs, ensuring businesses have full visibility into cross-border payment processes.
Regulatory Compliance: Built-in compliance tools streamline adherence to local regulations, reducing administrative burdens and risks of non-compliance.
Access to Financing
Embedded Credit & Loans: Businesses can access trade financing or working capital loans directly within platforms, supporting growth and smoothing cash flow challenges during cross-border trade.
Supply Chain Support: Financing solutions embedded in procurement platforms help businesses manage large international purchases with ease.
Simplifying Tax & Regulatory Compliance
Automated Tax Calculations: Embedded tools help businesses calculate duties, taxes, and other levies for cross-border transactions.
Built-in Compliance Checks: Solutions automatically ensure compliance with local and international regulations, saving time and reducing risks.
The road ahead for Embedded Finance
The evolution of embedded finance holds the potential to unlock new market opportunities and enhance the global financial ecosystem. Through strong collaboration among fintech companies, regulators, and technology providers, the industry can pave the way for embedded finance to deliver highly relevant financial services in an accessible manner to meet the needs of businesses globally.
About Okoora
Okoora is a leading fintech provider, offering businesses worldwide the financial infrastructure needed to scale their international operations. Recognized by CNBC and Statista as one of the world’s top 250 fintechs, the company’s automated platform, API, and embedded finance solutions empower businesses to collect and send payments, manage multi-currency accounts, and hedge FX risks. Okoora enables seamless operations in over 100 currencies and 180 countries.
Adyen’s UK banking licence and international footprint will strengthen Spendesk’s offer in core markets and support global growth
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Adyen, the FinTech business platform, has announced a long-term strategic partnership with Spendesk, the spend management platform for small and mid-sized businesses (SMBs). Innovation with Embedded Finance services characterises the partnership.
Embedded Finance Services
The partnership will support innovation in Embedded Finance services, as Spendesk continues to accelerate bringing products to market in 2025. Adyen continues to build its suite of embedded financial products, including business bank accounts and card issuing.
Spendesk offers a comprehensive spend management solution. It enables finance teams to automate workflows and gain full visibility and control over company spending. Moreover it provides essential tools like virtual and physical cards, expense management, and a new procurement solution. Also, Spendesk allows businesses to work with their existing accounting and financial software via its APIs and native integrations.
Scaling rapidly, Spendesk chose Adyen for its full stack Banking-as-a-Service (BaaS) coverage across multiple key markets. This eliminates complex multi-provider set-ups. Furthermore, with Adyen’s UK banking licence, the partnership empowers Spendesk to maintain full control over the payment experience. Also, it can provide UK customers with the card customisation they need, and embed financial products beyond payments going forward.
Enhanced Payment Solutions
Spendesk is focused on providing finance teams with greater control, visibility, and automation. It sees a significant opportunity to enhance payment solutions by refining spend management workflows for SMB users. Embedded Finance enhancements include:
Leveraging data to increase visibility and control on the end-to-end payment process.
Adding digital wallets (Apple Pay and Google Pay) to enhance XPays. A feature that provides companies with flexible payment options – improving the customer experience
Maximising operational efficiency and reducing friction for customers through a streamlined onboarding process and an optimised payment success rate and processing time
Spendesk needed a partner that could safeguard against financial crimes. With Adyen’s banking licences in the UK, US and EU, the company is highly regulated. Moreover, it can ensure Spendesk is continuously compliant within the countries it operates in and plans to expand to.
New Embedded Finance Opportunities
“Trust and accountability are critical in our industry, and to achieve our global ambitions we need a partner who supports our growth with shared values,” said Stéphane Dehaies, CEO of Spendesk Financial Services. “Adyen’s technology, geographical footprint, and commitment to innovation are helping us reach our goals as we navigate regulatory requirements and shifting customer needs. Furthernore, we chose Adyen because their approach aligns perfectly with our forward-thinking mentality and commitment to delivering best-in-class payment solutions and customer experiences. We share the same cultural DNA and together our fast-paced, transparent, and passionate approach to improving customer experience makes this partnership an incredible fit.”
“Helping grow businesses like Spendesk is at the core of what we do. Our customers’ needs drive our product development and it is great to see Spendesk capitalising on our market coverage and single card issuing solution,” said Hemmo Bosscher, SVP Platforms and Financial Services at Adyen. “Looking ahead, we are excited to help Spendesk fully seize the embedded finance opportunity as they scale their operations globally. As market leaders in BaaS and spend management respectively, this partnership drives real innovation for SMBs, a market category whose financial needs are often left unmet by traditional providers.”
Zachary Scott, Managing Director at Publicis Sapient on Buy Now Pay Later demand in the UK and the changing nature of CX in 2025 and beyond…
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In the dynamic world of consumer Embedded Finance, Buy Now, Pay Later (BNPL) services have become a game-changer. They offer shoppers greater flexibility and convenience. BNPL allows consumers to make immediate purchases while spreading payments over time, often without interest. Its popularity skyrocketed during the pandemic. Fuelled by the e-commerce surge, it continues to play a pivotal role in shopping habits. Recent surveys reveal that 39% of U.S. consumers plan to use BNPL within the next six months.
This growth isn’t confined to the U.S. It’s a global phenomenon. U.S. fintech giant Affirm recently launched its BNPL services in the UK, marking its first international expansion. Affirm selected the UK due to strong demand from merchants eager to incorporate flexible payment options into their offerings.
The BNPL boom reflects a broader trend in Embedded Finance, which integrates financial services seamlessly into non-financial interactions. BNPL, for instance, embeds financing directly into the retail experience. This allows consumers to access payment plans as part of their shopping journey. This integration simplifies the traditionally separate processes of purchasing and financing, creating a smoother, more user-friendly experience.
Optimising customer experience for Embedded Finance
The value case for Embedded Finance is based on this seamless customer experience and the opportunities it offers to enhance the services offered. Partner companies are able to provide financial services without having to maintain extensive and complex financial infrastructure, leveraging technology to facilitate these offerings instead.
Already, several opportunities are emerging that are poised to propel the growth of embedded finance into new sectors and applications. Banks and retailers should be prepared to seize opportunities from embedded insurance products, embedded wallets in non-financial apps, and new forms of embedded lending that go beyond the existing BNPL instalment model.
Consolidating Services
However, to succeed in this next phase, financial service providers and their partners will have to keep pace with and be ready to adapt to changing consumer preferences and requirements. Staying ahead of the curve takes more than just improving individual interactions. It involves curating a comprehensive journey that aligns with consumers’ expectations for simplicity, transparency, and flexibility. People are increasingly seeking a mobile-first platform that caters to both their financial and non-financial needs in a single, unified space. Driving further consolidation of customer journeys through Embedded Finance is likely to be a critical strategy for industry leaders in the next wave of adoption.
Advancements in open banking protocols and the rise of new FinTech ventures are setting the stage for more integrated financial and non-financial services, further blurring the boundaries between these two traditionally distinct customer journeys. Emerging trends in Generative AI and conversational banking will also contribute to the enhanced customer experience. These technologies are set to shape consumer expectations, with more and more people looking to access support and services through conversational experiences. Embedded Finance is no exception.
New Opportunities
For financial service providers, embracing these trends opens myriad possibilities. Leading the charge in Embedded Finance can contribute to customer acquisition, generate direct revenue from the new services offered, and enable cross-selling of other financial products.
For partners within the Embedded Finance ecosystem, the opportunities are equally substantial. As well as driving Net Promoter Score (NPS), they can unlock new referral or commission-based revenue streams.
It’s clear that the future of consumer finance is deeply linked to the progress of Embedded Finance. As more offerings beyond BNPL emerge, the boundary between financial services and non-financial experiences can become increasingly blurred. For providers and partners ready to embrace this change and leverage it to meet evolving customer needs, this represents a substantial opportunity.
Marqeta Flex is being developed with payments platform Branch and payment providers Klarna and Affirm, enabling real time and customised BNPL options for consumers.
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Marqueta, the global modern card issuing platform that enables embedded finance solutions for the world’s innovators has launched Marqeta Flex. Launched at Money20/20 the innovative new solution revolutionises the way Buy Now Pay Later (BNPL) payment options can be delivered inside payment apps and wallets. It surfaces them at the moment of need within an existing payment flow.
Marqueta Flex BNPL Solution
Marqeta Flex is being developed with leading payment providers Klarna and Affirm and payments platform Branch. Branch, a key innovation partner, plans to integrate the solution into its payments app for W-2 and 1099 workers. It enables end users to easily access BNPL loan options catered to their individual needs.
“Marqeta Flex is about building upon the transformational impact that BNPL has had over the last decade. It can help consumers access these options intuitively from inside an even greater range of payment experiences,” said Simon Khalaf, Marqeta’s Chief Executive Officer. “We are excited to partner with industry-leading BNPL players Klarna and Affirm in the space. We can give consumers more choice in how they pay for every transaction they want to make.”
Marqeta has already partnered to support the exponential growth of BNPL solutions, bringing pay over time options to millions of consumers globally. Furthermore, Marqeta Flex is poised to bring even further syndication to the BNPL space. The solution expands the distribution of BNPL while personalising the experience for shoppers. It is providing them with access to BNPL options when they need them. It supports some of the largest BNPL solutions and card issuers today. Marqeta is uniquely positioned to recognise the opportunity for expanded BNPL distribution and how it allows for enhanced payment capabilities and greater consumer choice.
BNPL Benefits
The intended benefits of Marqeta Flex for consumers, payment providers and issuers include:
Consumers: With Marqeta Flex, consumers will be guided to the BNPL options that can meet their needs. They get access to personalised BNPL options inside of the payment apps they use most often.
Payment Providers: Marqeta Flex expands BNPL distribution. Allowing payment providers that offer pay over time options to benefit from even greater access to consumers and higher transaction volumes.
Card issuers and digital wallets: Marqeta Flex is a powerful solution for digital wallets and card issuers. Allowing them to drive payment volume by incorporating multiple BNPL offerings into the transaction experience that can be customized to user preferences. With a single integration with Marqeta Flex, they’ll have access to a variety of global BNPL providers, increasing the speed at which they can build and launch card solutions that offer flexible payment methods, including custom and user-friendly BNPL loan options.
“We’re thrilled to be building this with Marqeta and innovating how BNPL can be applied,” said Ahmed Siddiqui, Chief Payments Officer at Branch. “We look forward to giving the workers we serve even greater payment access and choice.”
Marqeta Flex is intended to be fast and simple for consumers. Moreover, when launched, the user will choose the Pay Later option within their payment app and be provided with personalised BNPL payment plan options.
About Marqeta
Marqeta makes it possible for companies to build and embed financial services into their branded experience. Furthermore, it helps unlock new ways to grow businesses and delight their users. The Marqeta platform puts businesses in control of building financial solutions. It enables them to turn real-time data into personalised, optimised solutions for everything from consumer loyalty to capital efficiency. With compliance and security built-in, Marqeta’s platform has been proven at scale, processing more than $200 billion in annual payments volume in 2023. Marqeta is certified to operate in more than 40 countries worldwide and counting.
About Branch
Branch is the leading workforce payments platform that helps businesses deliver fast, flexible options for workers to get paid. Whether it’s sending earnings to employees or contractors, companies choose Branch. They know that faster payments can help them strengthen worker loyalty, save time and money, and drive business growth. Moreover, earners that sign up with Branch can receive quick access to earnings, rewards, and personal finance tools to help them manage their cash flow between pay cycles. Additionally, Branch partners with the nation’s leading companies in hospitality, healthcare, gig platforms & marketplaces, and staffing services. Branch has been honoured with a Webby Award. Best Financial Services, FinTech Breakthrough Award, Gartner Eye on Innovation: Financial Services, and Great Place to Work Certification. To learn more about Branch, visit https://www.branchapp.com
Lucian Daia, CTO at Zitec, on the rise of embedded finance driving customer loyalty across financial services
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The frenzy of Christmas and Halloween marketing is already in full swing, with date reveals of Christmas market returns to pumpkin patch locations. Retailers are gearing up to execute their strategies as the Golden Quarter approaches. This year, however, retailers have another string to their bow, another key message to snag a customer: ‘Buy Now, Pay Later’ (BNPL).
Business is booming in the BNPL game, with the market quadrupling in size since 2020. It is expected to hit a record level of £30bn in 2024. The payment option is fast becoming a staple in the digital wallets of millions for the major retail milestones of the year.
Halloween is the first major retail moment in the run-up to the festive season as Britain settles back into its winter routine. However, the rise of BNPL points to consumer behaviour that’s fast evolving and anything but predictable.
Retailers sink or swim based on the customer experience they deliver. From the rise of omnichannel strategies to speedy same-day deliveries, click and collect options, and attention-grabbing immersive experiences… There’s no shortage of initiatives to drum up customer loyalty. Now, payment solutions are part of the equation. Embedded Finance is front and centre of this change, integrating financial services (like loans, insurance, debit cards etc.) into businesses that don’t usually handle finance.
Application Programming Interfaces (APIs) offer a “Plug and Play” type functionality. Retailers can offer seamless payment solutions like BNPL or digital wallets directly on their systems. This integration keeps shoppers on the site and reduces the tiresome friction of third-party pop-up systems. Moreover, it offers features like zero-interest point-of-sale loans or app-based rewards. Of course, it allows them to check-out as easily and as quickly as possible too.
Bye-bye Velcro
Bye-bye Velcro, hello snazzy digital wallet that holds payment cards and bank account details all in one place. Digital wallets have become essential components of modern payments and offer a convenient and less risky way for shoppers to buy their items.
Gone are the days of searching for physical cards under stashes of files or keying in repetitive digits on a keyboard. Digital wallets also offer a reduced risk of fraud because of advanced encryption and tokenisation technologies. Beyond security, digital wallets provide retailers with valuable consumer insights.
For instance, if a customer buys a Halloween costume and decorations, retailers can use this data to target them with personalised offers. Such as a discount on themed candy bowls or matching spooky accessories. This level of personalisation is make or break for retailers today. Customers are setting a higher bar than ever for personalised content, offers and experiences that meet their needs and interests.
Speeding up cash flow with BNPL
Another innovation retailers need to have on their radar is instant payments. Unlike traditional systems that mean transactions can take hours or even days to complete, instant payments ensure funds are transferred within seconds.
For retailers, especially those operating on thin margins or managing high transaction volumes, the speed at which funds are made available can be make or break. The quick availability of cash means retailers can better manage their finances, buy new stock and address operational costs at pace.
Contrary to common belief, Brits don’t love queuing; in fact, they hate it. Faster payment options in-store have been pivotal in giving customers the speedy experience they demand so they can get on with their day. Quick transactions not only improve cash flow and reduce delays but enhance the customer experience. Making it ideal for those who’ve left their shopping too late, or forgotten an item on their list. As a result, customers walk away with the right impression.
Ditch the lines and pay with a tap
Retailers should be equipped with mobile point-of-sale (mPOS) systems that allow customers to make payments through their smartphones or other mobile devices, cutting down on wait times and speeding up the checkout process.
Retailers also stand to benefit from digital receipts, detailed sales reports, and real-time inventory management from having this system in place. This efficient processing not only improves cash flow but also provides valuable data for managing stock levels and customer preferences.
Beyond the Golden-Quarter
As retailers prepare for the Golden Quarter and beyond, understanding and leveraging FinTech payment innovations can seriously pay dividends. By adopting technologies such as embedded finance, digital wallets, instant payments, and mobile payments, retailers can improve their operational efficiency, enhance customer experiences, and position themselves for future growth in a digital-first world. Indeed, in recent years marked by economic shocks, huge tech advancements – especially with AI – and increasingly unpredictable consumer behaviour, it is crucial for retailers to stay ahead of payment options.
Providing consumers with flexibility, choices, and ultimately, ways to manage their outgoings and spread the cost will be key. Retailers will need to take a view on which innovations align best with the changing expectations of their customers and who they partner with to help them remain competitive.
SemFi by HSBC will deliver innovative embedded finance solutions for businesses
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HSBC has launched its new jointly owned venture, SemFi by HSBC. It aims to deliver Seamless Embedded Finance solutions to business clients.
The new technology company is a joint venture between HSBC and B2B global trade network Tradeshift. Furthermore, SemFi will embed HSBC payment, trade and financing solutions across a range of e-commerce and marketplace venues, including Tradeshift’s own B2B network.
SemFi will deliver its solutions in the UK to begin with. Furthermore, it will enable SME suppliers on e-commerce venues to access digital invoice financing from HSBC. Via a seamless experience it also aims to offer SMEs greater flexibility and security in their spend management through the bank’s virtual card solutions.
SemFi by HSBC
“Businesses are increasingly looking for seamless financial solutions that are embedded within their e-commerce journeys. So they can access these when and where they need them.
“SemFi by HSBC aims to deliver such embedded capabilities to help businesses grow. It will seek to bring the best of both worlds to our business customers and e-commerce partners. A startup technology mindset coupled with the global scale and expertise, of an international bank.”
Vinay Mendonca, Chief Executive Officer
The new venture is led by senior leadership drawn from HSBC. This includes Vinay Mendonca as CEO and Shehan Silva as Chief Operating Officer (COO). Additionally, Jo Miyake, Interim CEO of Global Commercial Banking, joins the SemFi board.
HSBC has been steadily building its capabilities and presence in embedded finance. It is driven by business customers seeking connected financial journeys to e-commerce venues.
HSBC supports around 1.3 million businesses worldwide. Moreover, it is the world’s largest trade bank, facilitating over $800 billion of trade flows annually.
Tradeshift supports over $260 billion of annual gross merchandise value for a million business users on its platform.
SemFi is intended to be a technology company and will not operate as a banking entity. Clients will be onboarded by the bank and the bank’s balance sheet will be leveraged for financing.
FinTech Strategy spoke with Ryan O’Holleran, Head of Sales, Enterprise, EMEA at Airwallex, to learn about the global payments and financial infrastructure provider
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Airwallex, a financial infrastructure provider, offers a range of services. Including multicurrency accounts, payment acceptance card issuing, foreign exchange (FX) payouts, treasury and expense management. In addition to supporting small and medium-sized businesses, the company also provides APIs and a software layer for direct access to enterprise businesses. As well as an enterprise platform product called Scale. Airwallex has found success working across various industries. It works with the likes of Bird (formerly MessageBird) to handle global accounts and backend treasury, and partners with Qantas to offer financial tools for their business partners.
The company also enables faster and more efficient payments through its patchwork network of financial partnerships and licenses. Airwallex has experienced significant growth even during economic downturns. As of August this year, Airwallex globally processed transactions worth more than $100 billion annually and saw a 73 percent year-on-year increase. It is now focused on embedded finance solutions and global expansion.
At Money20/20 Europe, FinTech Strategy spoke with Airwallex’s Head of Sales, Enterprise, EMEA, Ryan O’Holleran, to find out more…
Tell us about the genesis of Airwallex?
“Our co-founder, Jack Zhang, started a coffee company in Melbourne, Australia, which is still around today, with a few friends from university. And while they were building out this coffee shop, they were buying beans from abroad, along with supplies and packaging. They found how hard it was to actually pay for services, send funds abroad and deal with multiple currencies. So, they saw an opportunity to help streamline the financial infrastructure for small businesses. That’s when Jack and his co-founders put Airwallex together and built out an initial SME’s use case to allow multicurrency accounts and FX payouts. Since then, the business has really expanded…
Today, Airwallex provides a set of APIs – we’re really providing financial infrastructure to move money globally. On those APIs, we also have a layer of software that we can offer direct access to enterprise businesses. The third part of this, which is kind of the new product over the last three years, is our enterprise platform product called Scale. Scale allows you to embed those financial services into a product as well as a platform or marketplace. So, you kind of think about it as a direct treasury product, APIs and a platform product.”
Tell us about your role at Airwallex?
“I’m originally from San Francisco, grew up in the Bay area, started in tech, did a couple of startups, and I actually got into payments via Stripe. I joined Stripe back when there were about 200 employees in San Francisco. Spent some time in Chicago and then moved to the UK initially with Stripe. I was there for about five and a half years, as we went from 200 staff to 6,000. At that point, I wanted to get back to something a little bit different. To help more cross-functioning with product and help scale businesses. The opportunity with Airwallex came along where I saw the company addressing many things my customers at Stripe were asking for.
So, the FX piece, mass payouts, treasury, all complimented what Stripe is doing with acquiring. Since I joined the team three years ago, we’ve been scaling across EMEA. We now have offices in London, Amsterdam, Vilnius and just last year launched our office in Tel Aviv to cover Israel. And we have teams in the Americas and APAC where Airwallex was founded.”
What are some of the key challenges financial institutions are facing that you can help them with? What problems are companies asking you to solve? In doing so, what are the challenges for Airwallex?
“We work in different areas. This is where I think we have differentiated the business and also where I see the industry moving. If you look back over the last five, 10 years, there was this approach where you had Stripe and all the major players coming in and saying, we can do things and we can do it really well and you only need to use us, you don’t need to use a patchwork of providers. I think that is starting to shift. You see this with orchestration layers like Primer or Gravy, allowing people to be agnostic on PSPs. And then you’re seeing people think about redundancy. So, the heads of payments we’re talking to this week are looking at two or three providers because they need redundancy or want to use the best provider in each region. They don’t want to be siloed.
Airwallex can be used in a segmented approach. So, if you just need us for payouts, you can do that. If you just need us for FX, you can do that. If you just need us for acquiring, you can do that. Or we could do that globally and you can adjust as you see fit. So, the flexibility of Airwallex I think is one of our superpowers.”
Tell us about some of the successful partnerships Airwallex has been involved in…
“The interesting thing about Airwallex is that since we’re providing financial infrastructure, there’s a huge variety of customers we work with. One of the local ones is Bird (a cloud communications platform that connects enterprises to their global customers). Using our software product they are creating global accounts, handling backend treasury, payroll, suppliers and more. We’ve also worked with Qantas to build out an SMB solution embedding all of the Airwallex financial services and they call it Qantas Business Money.
Elsewhere, Brex in the US were looking for a provider to help with their payout rails. One of the things Airwallex has done is rebuilt the Swift network via local rails. So, we have a patchwork network of financial partnerships and licences where if you are located, let’s say in the US, but you want to pay somebody out in the UK, you get access to faster payment rails having never set foot in the UK or separate rails via Europe having never set foot in the EU. So, you get this mass payoff solution of local rails, which is faster, cheaper, and more efficient than using something like Swift.”
What trends are you seeing across the FinTech landscape? What opportunities do you see for Airwallex?
“I think where we’re seeing a lot of opportunities, in EMEA specifically, in B2B, vertical, SaaS, travel and marketplaces, is this embedded finance solution. It was kind of a buzzword a few years ago and now we’re actually starting to see it develop. I view it as actually embedding all of these financial services – whether it be a wallet, issued cards, or local multi-currency accounts – and being able to monetize that. So, we’re seeing this with a lot of our customers actually wanting to white label our products, embed that and bring payments on platform.”
And what’s next for Airwallex? What future launches and initiatives are you particularly excited about?
“The growth of Airwallex, specifically on a global scale, over the last few years is one thing I’m very proud of because it’s happened during one of the worst economic downturns we’ve experienced. FinTech was almost retracting in terms of budgets and investments. You’re starting to see the tide turn, but we were able to grow over 100 percent year on year, through some of the toughest times for business. And now we’re really starting to see that pick up because the businesses, who actually decided this is going to be a building year for us now, they’re going live, they’re accelerating, they’re growing.
And so we’re seeing the ROI of that investment. It’s a testament to the global financial infrastructure we’ve built. Meanwhile, Airwallex became cash flow positive in 2023. It now processes more than $100 billion in annualised transaction volume. The company now employs over 1,500 people worldwide working across 23 international offices.”
Why Money20/20? What is it about this particular event that makes it the perfect place to showcase what you do? How has the response been to Airwallex?
“The great thing about Money20/20, here in Europe, and in Asia and the US, is the good division between buyers and sellers. So, you have all these service providers like Airwallex, Amex, etc… And then you have the Heads of Payments from companies like Booking.com, Vinted and SumUp who are coming here with their teams to meet with providers. If you think about that from a sales perspective, those meetings are very hard to get outside of this environment. But over a week you get 15 different meetings each day that would normally take months to arrange. So, the ROI from this week is really powerful just from being able to have these conversations. Three years ago, we first came to suss out the event and as we’ve grown the response has grown. People are being proactive and keen to engage with us which is exciting to see.”
Philipp Buschmann, co-founder and CEO of AAZZUR on how the customer becomes the investor with Embedded Finance at the heart of the wealth management revolution
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Wealth management has traditionally been a game for the well-off. It often requires large sums of money just to get started. For decades, the idea of “investing” conjured up images of Wall Street brokers managing hefty portfolios for a small group of elite individuals. But, thanks to Embedded Finance, times are changing and the barriers to investing are coming down. The technology is reshaping how people handle their money. Here’s what it can do for you.
Tackling the investment problem
Historically, investing hasn’t been easy. Most brokers require a significant minimum deposit to open an account, often in the thousands. Fees and commissions on trades can add up quickly, and if you don’t have a large amount of capital, these costs can erode your profits. For many, these hurdles were enough to keep them from even thinking about investing. It simply didn’t feel like something for “ordinary” people with average incomes.
Even with the rise of online brokers, the stock market has remained intimidating to a lot of people, many of whom felt like they lacked the knowledge or resources to get involved.
On top of the classical challenges we must also discuss the upcoming wealth transfer. The next generation of users have no interest in sitting with wealth managers; at the same time they don’t have the knowhow to trade or invest.
Imagine being able to not only excite your customers but empower them as well. That’s what embedded finance solutions promise. As companies strive towards more inclusive messaging, adopting embedded finance tools has never been more valuable. One of the great perks is that it doesn’t require a complete overhaul of IT infrastructure, instead, it involves a seamless experience that even junior employees can understand and implement.
Embracing the solution with Embedded Finance
I’ve said it’s easy – but how easy? Embedded finance works by bridging the gap between traditional financial systems and the average consumer. By integrating financial services directly into everyday apps and platforms, it makes it possible for people to start investing without even realising they’re doing it. Monzo is an example of it in action. They used embedded finance solutions to enable customers to invest directly in the bank during its fundraising rounds. They raised millions by allowing users of the app to seamlessly invest and become shareholders, a great example of how “the customer becomes the investor”.
Think about how your business manages its money. You most likely use an app to track accounts and make payments. This is no different to customer budgeting, and it’s a window of opportunity for you to tap into. That app can offer you the ability to automatically invest any leftover money at the end of the month into a diversified portfolio. Customers don’t need to download a separate app or set up an account with a brokerage firm. Everything is integrated into the website they’re shopping on. This is the beauty of embedded finance – it makes financial services a natural part of your daily life.
For younger people just starting out on lower salaries and learning how to invest sensibly, there has never been a greater time to be innovative and branch out into financial services.
The second vector for investment is to centre it around a new social frame. Investment’s can be around supporting your ideals, for the environment, or for technologies sake. This means that there are apps/club/activities that can become another home for investment. The same way country clubs aren’t just for food, golf and banter. Embedded finance opens the door for classically aligned companies and charities to think about expanding their business model. I could imagine Greenpeace offering embedded investing. So, could the country club co-invest in art that is displayed (but also invested) in.
Equalising opportunity with Embedded Finance
Embedded finance allows financial services to be delivered in a more personalised, user-friendly way. Apps can now provide personalised investment recommendations based on a user’s spending habits, savings goals, and risk tolerance. And thanks to automation, these services are becoming more affordable and scalable. Instead of paying for an expensive financial advisor, users can rely on AI-driven tools to offer similar advice for a fraction of the cost, or even for free. Wealthfront does this by offering automated financial planning and investment management with AI-driven recommendations and tax optimisation strategies.
GoHenry is another example of a company taking the initiative and embracing its solutions. They allow customers to invest in the company using the Crowdcube platform. People can invest in as little as they want and become shareholders with ease. As a result, loyalty is enhanced and capital surges.
Another example is fractional investing. In the past, buying a single share of a company like Amazon or Tesla might have been out of reach for someone with limited funds. However, this no longer has to be the case as companies like Robinhood allow customers to invest in big stocks like Tesla for as little as £1, making it possible for anyone to grow their wealth without having to stretch themselves and get into debt.
What does the future hold?
As embedded finance continues to evolve, we can anticipate even more innovations in the world of micro-investing and wealth management. The lines between financial services and everyday life will continue to blur, making it easier than ever for people to manage their money, invest, and build wealth – all without needing a financial background or a large amount of capital.
Philipp Buschmann is co-Founder and CEO at AAZZUR, a one-stop-shop for smart embedded finance experience. Recognised as a rising star in the FinTech space, AAZZUR’s mission is to build profitable banking whilst at the same time empowering consumers to have access to better informed financial choices.
Philipp is a serial entrepreneur with extensive experience of working in Challenger Banking, Financial Services, IT and Energy across the world. He took one of his business’s public – Ignis Petroleum was publicly listed in the US and Germany.
Having started as a developer in Financial Services, Philipp has first-hand experience of the banking revolution from both a technology and financial perspective. His interest in behavioural economics helped inspire AAZZUR’s revolutionary work on customer centricity in banking.
Philipp holds an MBA from the London Business School. He is passionate about entrepreneurship and loves exchanging ideas, insights and discussing FinTech’s future. He has spoken at major Fintech events including Money 20/20, MoneyLive, Finovate, Fintech Matters, and the Future of Retail Banking.
Adam Edwards, Product and Growth Director at Satago on how embedded finance is helping drive digitisation for the B2B financial space
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Small and Medium Enterprises (SMEs) are at the heart of the UK economy. They contribute significantly to local employment and revenue across a wide array of sectors. However, the current economic landscape and consistently high inflation are inhibiting them from reaching their full potential.
Three key challenges which prevent SMEs from investing in growth are tight cash flow, poor access to capital and the late payments crisis. With over £32 billion in late payments plaguing them, SMEs need longer-term, meaningful policy action from the government, alongside better Working Capital solutions.
Investing in Embedded Finance
With a growing SME market needing better support than ever from lenders, banks are rapidly investing in IT adoption. Particularly, Embedded Finance tools, to better serve this sector. Indeed, analysts have forecast a staggering 148% growth in the Embedded Finance market. It is predicted to reach a revenue of $228 billion by 2028.
Banks have been quick to offer flexibility to consumers in the business-to-consumer (B2C) Embedded Finance space. Offering lots of options for flexible finance in response to high demand. However, the business-to-business (B2B) market has in many ways been slower.
There are certainly challenges here – but the opportunities are huge for the lenders that get this right to go on and serve the SME space. So, what can the B2B space learn from how Embedded Finance has succeeded in the B2C sector? And what are some of the benefits and new challenges that this investment could pose?
The role of Embedded Finance in supporting SMEs and founders
Embedded Finance emerges as an innovative approach to bolster SME support. It integrates financial services directly into non-financial platforms. This integration empowers SMEs to seamlessly access critical financial services. These include instant credit, streamlined payments processing, and optimised cash flow management. This enhances operational efficiency and financial resilience.
When we look at B2C financial services, we can see traditional banks working hard to catch up with challenger banks. These competitors have presented consumers with entirely new means to access digital banking, improve their visibility on financial information, and manage their funds and savings with secure API access.
This has forced traditional banks to digitise quickly in the B2C space to remain competitive and keep up with customer expectations. Embedded tools have become a key part of this. While the B2B financial services industry hasn’t traditionally faced the same level of market pressure to innovate – this is now starting to change. We will start to see the impact in a couple of ways.
I predict we will begin to see rapid growth in the number of partnerships between FinTech companies and B2B lenders. Where banks such as Barclays have already been partnering with the likes of Amazon on the consumer side for a long time to offer flexible payment capabilities, we will see a lot more similar partnerships starting to take place in the B2B space, to support the growing SME market. As a result, I anticipate a rise in the number of online marketplaces dedicated to the B2B lending space. We will also see increasingly niche market areas – such as agriculture and dedicated equipment manufacturers, for example.
The opportunities and challenges with Embedded Finance
There are several opportunities to be capitalised on via Embedded Finance in the B2B space. Lenders that have been held back by legacy systems in the past will now be able to offer a more flexible suite of digital finance options to customers, especially SMEs. SMEs, which may be run by a single founder or a small group of stakeholders, are likely to be used to an agile structure. They can take big decisions quickly and will be keen to be able to flexibly access financial tools. Through integration with expert providers, lenders can also benefit from new origination channels and access new pools of customers for bank accounts, financial consultancy and more.
For the fintech partners and integrators, including those providing white-labelled products to banks, there’s a chance to take advantage of the trust customers have in their banking providers. And the lenders’ brand reputations can increase their own revenue and future opportunities for sale.
Meanwhile, SMEs are set to reap the benefits of being able to offer better user and payment experiences to their own customers further up chain. They too, will benefit from better cash flow management, improved financial visibility and increased flexibility via different working capital tools. Just like consumers are able to – all of which will be facilitated by better digital tools.
However, it is worth acknowledging that as the B2B space grows, heightened concerns around fraud risk associated with financial transactions are also likely to emerge. Going forwards, we’ll see more analytics and artificial intelligence built into Embedded Finance. This will feed into underwriting models and support fraud checks. With more complex transactions and shared financial data via Embedded Finance partnerships, the risks of non-compliance could become more perilous. Therefore, there are certainly challenges ahead.
A competition for innovation in the B2B space
For SMEs to thrive, sustained and reliable access to cash flow is essential. Collaborative efforts between the government and the financial services industry are critical. Establishing robust regulatory frameworks and fostering innovation in Working Capital solutions will be vital.
The Embedded Finance market in over the next year and beyond can expect to see significant emphasis on B2B players, such as banks and corporate lenders. They are looking to catch up with the consumer market and serve SME customers with the most secure – and flexible – lending options.
Consumers have realised the benefits of seamless, digital financial services for themselves. We’ll now see demand growing as SMEs expect the same innovation and experience when it comes to their B2B financing. Lenders and banks that want to satisfy this growing pool of customers hungry for flexibility and sustainable lending support, will need to be willing to evolve and digitise, or risk missing out on the competition.
Satago is a leading fintech that enables lenders and corporates to streamline operations, boost revenue, and enhance their business customer experiences. This is achieved through cloud-native Working Capital and Cash Flow solutions, powered by real-time data, Open Banking, and API technology.
Nada Ali Redha, Founder of PLIM Finance, on flexibility, consolidation, and the evolution of digital payments
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Embedded finance, the integration of financial services into non-financial platforms, is no longer a niche trend. It has become a defining characteristic of modern commerce. Consumers are increasingly drawn to the convenience and flexibility it offers, leading businesses across industries to adopt embedded finance solutions. The rise of these platforms, combined with shifting consumer expectations, presents both opportunities and challenges for traditional banks and fintech players.
Customer-centricity with Embedded Finance
At the heart of this transformation is a desire for simplicity. Consumers are opting for solutions that allow them to bypass the inconvenient processes associated with traditional banking. They are avoiding excessive paperwork, account opening delays, or hidden charges. Instead, they are drawn to platforms that offer seamless integration of services. Enabling them to make purchases, manage their finances, and access credit without ever leaving the ecosystem of their preferred brands.
E-commerce giants like Amazon have been quick to recognise this trend, embedding financial services directly into their platforms. This allows them to offer a one-stop solution that caters to all their customers’ needs, from browsing products to making payments or accessing credit options. The appeal is clear: customers stay within the same digital environment, enjoying a frictionless experience that saves them time and effort. This development, however, raises the stakes for standalone payment providers like PayPal and Klarna, as they are increasingly excluded from these in-house ecosystems.
Shifting financial services
For legacy banking providers, this shift presents a major challenge. Traditionally, these institutions have relied on their extensive networks, trusted brands, and regulatory backing to maintain a dominant position in the financial landscape. But as businesses integrate financial services directly into their offerings, banks are no longer the first point of contact for many consumers. A growing number of businesses are bypassing traditional banks altogether, embedding payment and lending options at the point of purchase or within their own apps. This trend highlights a fundamental shift in how consumers interact with financial services, often without even realising it.
In response, payment providers and fintechs must find innovative ways to remain competitive. One potential strategy is for these companies to develop their own marketplaces. By creating an ecosystem of services that includes not only payments, providers can capture more customer loyalty and engagement. This would enable fintechs and payment solution companies to offer a holistic, embedded finance solution. Rather than relying on external platforms or partnerships.
PLIM Finance
A case study for this would be PLIM Finance’s marketplace, which offers a highly customised experience. PLIM connects consumers with their desired services in a way that prioritises personalisation and convenience. As a platform built with user-centric design at its core, it allows consumers to search for treatments based on location, type, and specific clinics, giving them the ability to make informed decisions effortlessly. This is achieved through a search engine that filters results to suit each individual’s exact needs. Enhancing the user experience by eliminating irrelevant options for a streamlined experience. PLIM’s marketplace also encourages partners to create detailed profiles, showcasing their services, reviews, and credentials, which enhances visibility and attracts new clients. By fostering a direct connection between consumers and clinics, PLIM’s marketplace stands out in the embedded finance space. Ensuring a seamless, personalised customer experience that is simple and easy-to-use.
Strategic partnerships
Another potential strategy is deeper collaboration with external partners. By integrating their services into a wide range of businesses, payment providers can continue to capture market share. Without needing to create their own consumer-facing platforms. Strategic partnerships can expand the reach of these payment solutions, allowing them to tap into user bases they might otherwise miss. For example, smaller or mid-sized businesses may benefit from embedding a well-established payment solution into their website or app rather than developing their own in-house system.
However, not every provider will be able to meet the demands of this rapidly changing landscape on their own. As the embedded finance space continues to mature, industry consolidation becomes a very real possibility. Larger players may acquire smaller fintech companies. Integrating their innovative solutions into existing platforms can offer a more comprehensive suite of services. This would mirror the broader trend in the tech sector, where big players often absorb disruptive startups to maintain their competitive edge. Consolidation offers both challenges and opportunities. While smaller companies risk losing their independence, they also gain access to the resources and customer base of their new parent companies.
Evolving financial landscape
This evolving landscape is also occurring at a time of significant economic uncertainty. Financial stress often pushes consumers to reevaluate their spending and financial habits, with many looking for greater control over their cash flows. This is where embedded finance stands out. The flexibility it offers allows consumers to manage their money more efficiently, whether through payment deferrals, buy-now-pay-later (BNPL) options, or quick access to credit. These features are particularly valuable when budgets are tight or income is uncertain.
Moreover, embedded finance solutions empower consumers by giving them more control over how they manage their transactions. For example, BNPL options give individuals the freedom to split payments over time, making larger purchases easier to manage without the immediate financial burden. This level of control resonates with modern consumers, who increasingly seek transparent, flexible financial solutions that can be tailored to their personal circumstances.
For businesses, this presents an opportunity to strengthen customer loyalty by offering embedded finance services that align with consumer needs. By removing barriers to purchasing, businesses can enhance the customer experience, which, in turn, can drive increased sales and long-term engagement. As a result, companies that adopt embedded finance solutions can gain a competitive edge, particularly in sectors like e-commerce, where convenience is king.
Conclusion
In conclusion, embedded finance represents a fundamental shift in how consumers interact with financial services. As more businesses adopt these solutions, traditional banking institutions and standalone payment providers will need to adapt or risk being left behind. Whether through developing their own marketplaces, forging deeper collaborations, or pursuing mergers and acquisitions, the financial services landscape is poised for continued transformation. Embedded finance, with its focus on flexibility and convenience, is likely to become an integral part of the future of commerce—benefiting both consumers and businesses alike.
The automotive industry is transforming vehicles into mobile banking centres with the introduction of embedded finance. This allows drivers to…
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The automotive industry is transforming vehicles into mobile banking centres with the introduction of embedded finance. This allows drivers to seamlessly pay for fuel, tolls, parking, and electric car charges without leaving their cars.
Embedded banking or embedded finance is a technology that is used on many websites for easy transactions. It integrates financial services like payments, accounts, or lending into non-financial products or services. That technology can also be brought into your car.
It turns banking into a part of driving, creating an efficient experience for drivers. With this new system, drivers can easily manage all of these payments automatically making for seamless transactions.
Benefits of Using Embedded Banking
Built-in banking does more than just make payments easier. It can also help drivers choose the right car based on how they drive. For example, if someone often drives long distances, the system might suggest a fuel-efficient car. If another driver drives mostly around town, a smaller car might be recommended. This intelligent system can make buying a new car easier and more personal.
Insurance companies can also benefit from this technology. They can see how people drive and adjust their premiums accordingly. For example, a cheaper insurance premium may be given to a driver with a clean driving record. On the other hand, a driver who has a history of speeding or traffic accidents may get a more expensive premium. This makes insurance fairer and more personalised to each driver.
Car companies that are the first to add built-in banking will have a big advantage. Buyers will want to buy cars with this new and convenient feature, giving these companies an edge. In addition, this technology allows car companies and banks to increase revenue. They could offer special deals or services to drivers who make frequent use of the in-car payment system.
Enhanced Financing Options
Embedded finance simplifies vehicle financing by integrating financial services into the car-buying process. Furthermore, customers can apply for and manage loans directly through their vehicle’s interface, with loan options personalised to their financial profile and driving habits. This innovation improves user experience by making payments, financing, and insurance easier and more secure.
Embedded banking turns cars into mobile banking hubs, leveraging data from modern vehicles to customise financial products. Moreover, insurance premiums can adjust based on driving behaviour, financing can match vehicle usage, and payments for charging or tolls can be automated, enhancing efficiency and customer satisfaction.
Seamless Transactions
Embedded finance simplifies transactions by allowing drivers to pay for services like fuel, tolls, and parking directly through their vehicle’s system. This integration eliminates the need for physical payment methods, making the driving experience smoother and more convenient.
In the automotive industry, embedded finance also transforms how customers handle car purchases and financing. By integrating banking, lending, and insurance services into the vehicle’s interface, automotive companies can offer a more seamless and convenient experience. Using APIs from specialised providers, this approach opens new revenue streams and enhances overall customer satisfaction.
Increased Sales
Automotive companies that adopt embedded finance technologies can experience a significant boost in sales and revenue. By offering integrated financial services, car manufacturers can attract customers looking for modern, convenient solutions.
According to McKinsey, embedded finance can boost sales by increasing conversions, average purchase amounts, and customer loyalty. Research by RBC Capital Markets shows that buy now, pay later (BNPL) options can raise checkout conversion rates by 20-30 percent and lead to higher spending per transaction.
A major global retailer has found that customers using their embedded lending services spend 20 percent more. However, the solution must be easy to use; otherwise, abandonment rates can be high.
The Collaboration of Industries for Embedded Banking
This new technology also encourages teamwork between different industries. For it to work well, car companies, technology companies, and banks need to work closely together. They need to create strong security measures to protect users from potential online threats. This collaboration is important to ensure that the system is secure and reliable.
By connecting cars and financial services, embedded banking will accelerate innovation. It will help create a future where driving and banking are connected. This will lead to a more efficient and customer-friendly world.
New Technology Leaders
Mercedes-Benz is already leading the way with this technology through its partnership with Mastercard. In Germany, Mercedes-Benz customers can start the fueling process from their car and pay with their fingerprints. This is the first time in-car payments have been used at gas stations.
When a driver arrives at a connected service station, the Mercedes Me Fuel & Pay service starts automatically. The driver selects the gas pump, and the system calculates the cost. Payment is made with a fingerprint. After refuelling, the invoice appears on the screen and is emailed to the driver, allowing them to leave without visiting the checkout.
Future Prospects
This new technology will help both the automotive and banking industries. It makes life easier for drivers and promises to change the way we drive by enabling easy payments on the go.
Once all car companies start using built-in banking, the current system of driving will change forever. This technology will turn cars into more than just vehicles to get from one place to another; they will become smart, connected hubs that make life easier for drivers. The future of driving begins with the implementation of embedded finance.
Alloy, the identity risk management company trusted by over 600 leading banks, credit unions and fintech companies, has released its…
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Alloy, the identity risk management company trusted by over 600 leading banks, credit unions and fintech companies, has released its 2024 State of Embedded Finance Report.
The Report examines the year’s top trends in embedded finance risk management and compliance. Alloy surveyed more than 50 professionals at financial institutions operating bank sponsorship programs in the United States to learn how their businesses are responding to compliance challenges.
The Report is being published at a time when sponsor banks in the US are facing increased regulatory scrutiny. A reported 25.6% of the FDIC’s formal enforcement actions have been directed at sponsor banks since the beginning of 2024.
Alloy’s report found that while embedded finance programs drive significant revenue (over 50%) for sponsor banks, a majority (80%) of respondents reported that meeting embedded finance compliance requirements as a sponsor bank is challenging in the current environment.
“Running a sponsor bank program is inherently complex because you have banks who are highly regulated working with companies that are often new, fast-growing, and creating entirely new ways for consumers to interact with money,” said Tommy Nicholas, CEO and co-founder of Alloy.
“Despite the challenge, we’re already seeing sponsor banks respond to regulatory developments by investing in better controls, training, and adding to their compliance tech stack.”
State of Embedded Finance Report 2024
Here are five of the key findings from Alloy’s State of Embedded Finance Report:
1. Over half of sponsor banks’ deposits and revenue come from embedded finance partnerships.
Partnerships between banks and fintechs are a cost-efficient approach to catalyze growth through increased deposits, seamless UI, and accelerated innovation.
2. As regulatory scrutiny grows, embedded finance partnerships are becoming harder to maintain.
The embedded finance boom resulted in many banks testing the waters of bank sponsorship programs. As the complexity of managing these programs grows, we may see sponsor banks with less sophisticated embedded finance programs and tech stacks leave the space entirely.
3. Respondents cite reputational damage as the top consequence of compliance violations.
Reputational damage often results in increased regulatory scrutiny, including more frequent examinations and document requests. This heightened oversight can strain resources and pose ongoing operational challenges.
4. 90% of financial institutions face challenges when meeting compliance requirements as a sponsor bank.
Lack of control and audibility over fintech partners’ policy controls were cited as top challenges to meeting compliance requirements. Managing compliance across multiple jurisdictions and adapting to evolving regulatory changes were also top concerns.
5. 94% of respondents say they plan to invest in new compliance technology to help them manage their embedded finance partnerships.
As attention surrounding compliance missteps has grown over the past few years, there are new tech solutions available to help bridge the gap between sponsor banks and fintechs.
Download the Report
Respondents included 51 decision-makers from financial institutions operating bank sponsorship programs in the United States.
Surveys were conducted by The Harris Poll, a leading survey platform for over 60 years.
For further insights you can download the full report here
Embedded finance is transforming e-commerce for the better. It enables online businesses to offer payment processing, lending, insurance, and other…
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Embedded finance is transforming e-commerce for the better. It enables online businesses to offer payment processing, lending, insurance, and other financial services within their own platforms as a non-finance platform. The convenience and efficient shopping experience offered is changing the way people shop and how e-commerce businesses operate.
The companies that implemented embedded finance have seen significant growth in conversion rates of up to 12 percent, the average order value of up to 30 percent, and as much as a 7 percent incremental revenue. Brain & Company’s 2022 report also projected the embedded finance market value to grow to $7 trillion by 2030, indicating an increasing demand for this service.
Embedded Finance benefits
Embedded finance offers integrated payment solutions for e-commerce businesses. Customers can access financing options at the point of sale without switching to other platforms. This seamless experience makes it easier for buyers to complete their purchases, ensuring revenues for the businesses.
This integration provides better access for financial products, especially digital banking. Commonly, digital bank accounts are easier to set up than their traditional counterparts. It allows non-banking populations can easily make their purchase in e-commerce platforms.
Embedded finance opens new sales and revenue stream opportunities for e-commerce businesses. They provide sellers with working capital loans based on sales data, enabling them to earn additional revenue through interest and fees. The integration also increases customer retention as they are less likely to switch to competitors. This leverage offers long-term success in a competitive market.
Personalisation is another embedded finance’s strong suit. E-commerce businesses can use the customer’s data from their platforms to offer financial products tailored to their needs, creating a better customer experience.
Accenture found that 63 percent of consumers are more likely to buy a financial product from non-financial platforms that they trust. This report emphasises the importance of personalised embedded finance in generating more financial product sales.
Case Study: Amazon
One of the e-commerce platforms that successfully uses embedded finance isAmazon. In 2007, it launched Amazon Pay, allowing users to make purchases on external sites using their Amazon account details. This move not only expanded Amazon’s revenue opportunities but also strengthened customer loyalty.
Over the years, Amazon has continued evolving its embedded finance offerings, including one-click payments, buy now pay later, and lending services. Their latest venture involves a cash advance program in partnership with fintech company Parafin, which provides select sellers easy access to capital without interest or collaterals.
Case Study: Shopify
Shopify also creates a good embedded finance ecosystem with its various financial products. The Canadian e-commerce platform launched Shopify Payments in 2013 to simplify payment. This was followed by Shopify Capital in 2016, a lending product now available in four countries. The latest addition is Shopify Balance, a financial product offering a bank account and a debit card for managing financial activities.
Shopify earns most of its revenue from “merchant solutions” rather than just e-commerce software. This segment, which includes financial and fulfilment services, is growing much faster than its SaaS offerings — 29 percent compared to 8 percent as of Q4 2022, according to the company’s financial report.
Future Outlook for Embedded Finance
The future of embedded finance seems promising, with experts projecting an increase in demand and market share. As customers expect better integrated financial solutions, many companies will continue to adopt this system.
Embedded finance will also continue evolving with new technological advancements like artificial intelligence (AI) and machine learning (ML). Both AI and ML are projected to play a significant role in increasing efficiency, security, and sales for embedded finance in the future.
To maximise the benefits of embedded finance, financial institutions and e-commerce businesses should collaborate to anticipate possible hurdles. Regulatory and compliance challenges are one of the complex issues that may hamper its development.
E-commerce platforms should also ensure their new sophisticated solutions are scalable. As new financial technology is adopted, the platforms should be capable of managing increasing transaction volumes without sacrificing performance or security.
Drawn by increased flexibility and convenience, retailers are embracing embedded finance solutions in the hope of opening up new revenue streams.
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Embedded finance is gaining significant traction among retailers. The term refers to the integration of financial services into non-financial applications and platforms. For example, an app that offers cashback on large purchases, or pay later features with zero interest. This new crop of digital tools is enabling retailers to strengthen customer relationships.
Retailers can create a more convenient shopping experience by providing features like flexible payment options and personalised financial advice directly within their platforms. This approach not only builds customer loyalty but also opens doors to new revenue streams from integrated financial services.
Enhancing Customer Shopping Experience
Embedded finance can keep customers engaged in the retail environment and enhance the customer shopping experience. By embedding payment options directly into their platforms, retailers can offer a faster and more convenient payment process. Customers do not need to leave the retail environment to complete a transaction.
One of the most significant benefits of embedded finance is the ability to offer point-of-sale financing. Customers can apply for funding at the time of purchase, rather than having to apply for credit separately.
Referred to as BNPL (buy now and pay later), this feature makes purchasing decisions easier and more flexible. This flexibility is driving customer loyalty. A study by Vodeno found that 40% of respondents would only choose brands offering BNPL and similar financial technology features like cashback. This number jumps to 50% for young adults.
Increasing Sales
Research by Natwest and BCG shows promising results for businesses that adopt embedded finance. Retailers saw conversion rates jump by 12%, average order value increase by 30%, and revenue rise by 7%.
Embedded finance can be a strategic tool for maximising revenue. Instead of just processing transactions, retailers can offer additional financial services for a fee. For example, a procurement platform could charge for automated reconciliation. This will save businesses time and generate new income.
Successful Implementation and Future Innovations
Several retail companies have successfully implemented embedded finance. These include Amazon with its Amazon Pay. The feature allows customers to use their payment information stored on various platforms. Another example is Walmart‘s mobile app. This platform provides customers with a variety of financial services, from paying for their groceries to managing their Walmart MoneyCard.
John Lewis has also integrated its financial services, offering customers credit cards, insurance, and personal loans directly through their retail platform. There’s also Tesco Bank, which provides a range of financial products, including savings accounts, loans, credit cards, and insurance products.
According to KBV research, the global embedded finance market is expected to reach $384.8 billion by 2029, reflecting a compound annual growth rate (CAGR) of 30%. Parallel to the growth, retailers will continue to innovate, offering more integrated financial services. These can include more sophisticated loyalty programmes, personalised financial advice, new payment options, and enhanced data analytics to better understand and serve customers.
Retailers must embrace these innovations to remain competitive and meet the ever-increasing expectations of modern shoppers. By integrating financial services into non-financial products or services, retailers not only create added value for customers but also increase customer loyalty. In addition, embedded finance also presents opportunities for retailers to increase profits.
Small businesses are the backbone of the global economy. The World Trade Organisation reports that small and medium-sized enterprises (SMEs)…
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Small businesses are the backbone of the global economy. The World Trade Organisation reports that small and medium-sized enterprises (SMEs) make up over 90 percent of all businesses, employ 60 to 70 percent of the workforce, and contribute 55 percent of GDP in developed economies. Despite their significance, they may face barriers to accessing financial services. Embedded finance services offer small businesses innovative solutions to traditional financial hurdles.
Embedded finance combines financial services with non-financial experiences. Technology companies partner with banking institutions to offer these services directly within their platforms. This means customers can access financial tools, like making payments or managing accounts, without leaving the platform.
Analysts atGlobal Market Insights predict the embedded finance market will reach a compound annual growth rate (CAGR) of over 29 percent between 2023 and 2032. A key driver of this growth is the increasing demand for faster and easier transactions.
Embedded finance allows businesses to offer sophisticated payment and banking services directly to their customers and suppliers. This removes many of the frictions associated with business-to-business (B2B) payments, especially as these transactions are typically made in real-time.
By embedding financial services into their offerings, businesses can increase customer loyalty, increase revenue opportunities, and become more competitive in the market. This integration allows customers to access various financial services without hassle, creating a seamless customer experience.
It also offers small businesses innovative solutions to traditional financial hurdles, such as cross-border commerce and evolving security and privacy requirements. Embedded finance also helps businesses provide services such as loans, insurance, debit cards, and investments through their platforms.
Access to credit
Getting credit remains a major challenge for many small and medium-sized businesses. A Goldman Sachs report found that 70% of small businesses struggle to access funding for daily operations, inventory management, and growth. According to the same report, this lack of financing hinders 76% of SMBs.
Embedded finance offers a potential solution. Businesses can integrate financing options, like credit cards, directly into their services. This provides much-needed financial flexibility for their small business customers. Improved cash flow for small businesses strengthens the partnership between both parties. The larger company becomes a key player in the small business’s growth journey.
Improved cash flow with Embedded Finance
Cash flow is a significant challenge for small businesses as many operate on thin margins. Embedded finance can help small businesses overcome that by integrating payment processes and real-time financial data into business operations.
For example, point-of-sale (POS) systems with embedded payment options allow businesses to receive funds instantly. Meanwhile, automated invoicing and payment reminders can reduce the time and effort required to chase down payment payments.
Enhanced Customer Experience
By integrating payment solutions directly into their platforms, businesses can offer features like one-click payments, installments, and digital wallets. This streamlines the checkout process and boosts customer satisfaction.
Loyalty programmes also become more attractive with embedded finance. Businesses can reward returning customers with discounts, cashback, or exclusive offers, strengthening brand loyalty and driving repeat business.
For example, Deliveroo’s ‘Deliver Money’ feature streamlines food delivery by enabling real-time payments. This eliminates the need for cash and waiting for change, speeding up transactions and creating a smooth checkout experience. Faster access to earnings empowers small businesses to fulfil orders quicker and potentially offer special promotions.
As digital convenience continues to shape consumer expectations, embedded finance is a key factor in transforming how consumers manage their finances.
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Embedded finance is the integration of financial services into non-financial platforms. It allows businesses to offer financial products and services within their existing apps and websites. Integrating well improves customer experience and opens up new business opportunities.
Embedded finance evolves incredibly fast as a segment within Fintech – a sector guiding how our digital future will work. Financial services are rarely so exposed to the real-time digital user experience of consumers as they are with things like embedded banking.
The emerging embedded finance trends for 2024 are driven by changes in consumer needs, a maturing sector, and advances in tech and regulation.
Understanding these trends as they unfold is critical for analysts, executives, and any industry actor.
1. Integration with E-commerce Platforms
Possibly the most notable embedded finance trend for 2024 is its increasing integration with e-commerce platforms.
Consumers now expect more than just a variety of payment methods at checkout. They want features like one-click buy buttons, pre-approved financing options, and loyalty programs with instant rewards. By embedding these financial services directly into their platforms, e-commerce businesses can provide a smoother, more personalised shopping experience. This can also drive higher sales and customer retention.
Complacency here is a risk. What was cutting-edge for the past few years will quickly look dated as e-commerce integrations improve. That presents a real danger at the point of transactions because digital consumers do not hang around long if the experience is better elsewhere.
2. Rise of Buy Now, Pay Later (BNPL) Services
Buy Now, Pay Later (BNPL) services revolutionised the experience of financial services for younger consumers when they developed a few years ago. In 2024 this embedded finance trend will keep growing.
We have seen the rise of brands like Clearpay and Klarna to household-name status. Their progression to embedded banking options on checkout pages across a slew of major websites and apps was a watershed moment.
BNPL providers allow customers to make purchases and pay for them in instalments, often with little to no interest. It has seen rapid growth, especially with younger consumers.
This embedded finance trend is commonplace and established. There is room to bring even more flexibility to transaction payments. As BNPL’s success is driven by the most tech-savvy age cohorts, expanding its reach in new and innovative ways is both a necessary and profitable enterprise.
Integrating BNPL options directly into the checkout process made it easier for customers to make purchases. This year, more BNPL options will emerge. Providers will partner with a wider range of businesses as they keep adapting to consumer spending habits.
3. Expansion into new sectors
Embedded finance is no longer limited to e-commerce and retail, where it first made its name by making the inaccessible accessible (through BNPL), improving customer experience with embedded banking, and cultivating loyalty programs by packaging financial services into consumers’ purchasing journeys.
Those opportunities in online and offline retail were relatively low-hanging fruit, but major sectors are ripe for harvesting in 2024. Embedded finance trends are appearing in enormous sectors where the opportunities are enormous.These include:
Healthcare: Patients can access financing options for medical procedures or subscriptions to wellness programs directly at point of care.
Automotive: Car dealerships and ride-hailing platforms can offer car loans, insurance products, and instant financing for rentals and maintenance services within their apps.
Travel and Hospitality: Travel booking platforms and airlines can provide travellers with instant financing for flights and hotels, travel insurance, and currency exchange within their booking processes.
4. FinTech partnerships flourish
The success of the embedded finance ecosystem depends on collaboration. Unsurprisingly, this means Fintech partnerships are an embedded finance trend, but 2024 predictive indicators suggest that the sector is now mature enough for these partnerships to become more complex. This is opens up new fields of opportunity,
Traditional financial institutions are recognising that maturity and are responding by increasingly partnering with Fintech companies.
Fintechs bring agility and tech, while banks offer regulatory compliance, a broad customer base, and the benefits of trust and reputation.
These partnerships are the indicator of a maturing sector that is now able to integrate with the traditional industry it originally spun off from. These Fintechs bring in the innovations and practices that matured outside traditional financial services, and a primary benefit of that will be giving access to embedded finance trends, embedded banking solutions, and a customer experience suited to the modern digital consumer.
5. Cybersecurity centre stage
Cyber threats have been a major issue for years and mass fraud campaigns that attempted to hijack checkouts were a big feature of the spike in fraud that hit at the start of the Covid-19 lockdowns.
Cybersecurity will always be necessary, but the 2024 predictions for embedded finance will have been noted by criminal groups, too.
These major embedded finance trends also mean the attack surface for cyber threats is expanded in this transitory phase. Criminals will inevitably target traditional institutions now partnering with fintechs and embracing embedded banking – the opportunity to find a vulnerability to exploit during the period of transition is too good for them to pass up. The same is true across industries, all of which present opportunities for fraud, theft, and ransomware attacks.
Protecting sensitive data from hacking will be as crucial as protecting the embedded financial services themselves. This is the case for finance providers, Fintechs, and the big firms in industries like insurance or healthcare that have sensitive patient and consumer data to protect.
Advanced security measures like strong authentication protocols, data encryption, and continuous monitoring for suspicious activities will be necessary. Collaborating with cybersecurity experts and conducting regular security audits will be crucial for building and maintaining trust with consumers and businesses.
The cost for implementing increased measure may be high but the risks come with consequences – monetary, reputational, or regulatory – will be severe,
6. Evolving regulatory landscape
The regulatory environment for embedded finance changes all the time. Predicting what will happen is as important as adapting to the new reality when it actually happens.
As the industry grows, regulators are coming to grips with a fast-changing environment, but 2024 predictions suggest a slew of new guidelines to ensure consumer protection, data privacy, and fair competition is coming the industry’s way.
Embedded finance providers need to stay informed about these changes and adapt \ to remain compliant. Collaboration between industry players and regulators will be key to creating a sustainable and healthy embedded finance ecosystem. So will planning for where legislation and regulation is likely to come and ensuring strategies manage the risk appropriately – maximising opportunities without compromising long-term prospects.
7. Open Banking fuels data-driven solutions
Open banking regulations are paving the way for a data-driven approach to financial services.
Embedded finance providers can use open banking APIs (Application Programming Interfaces) to access consumer financial data with their consent. Open banking APIs have been on the market for a while, but their analysis and use look like they are becoming more sophisticated.
This will lead to the creation of more personalised financial products and services, such as tailored insurance quotes, automated savings plans, and pre-approved credit options. It also means more financial services will reach more consumers and businesses that occupy the vast market gaps in financing that traditional services have failed to adequately serve.
As open banking adoption increases, embedded finance solutions leveraging the analyses they provide will also become more sophisticated: the better the data they get from open banking APIs, the more data-driven and far-reaching they can become.
The risk of misreading data has kept open banking from surging ahead, but ultimately the consequences of what it enables will be huge and transformative for economies and populations. Any progression brings huge opportunity.
2024 predictions make a febrile atmosphere
Among these 2024 predictions is a common theme – once-transformative embedded finance solutions could transform into vulnerabilities through the year, but only because of the massive opportunities that are opening up as embedded banking proliferates and financial services adapt.
The sector’s future is filled with possibilities, but dangers still lurk and they are very real. And so are the threats of missing out. 2024 will reward those who focus on continually improving the reach of financial services through things like embedded banking – it will also punish those slow off the mark. This is a dynamic sector poised for significant growth and innovation.
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.
Throughout history, finance and banking have seamlessly adapted to integrate with evolving consumer lifestyles. Embedded Finance exemplifies this ongoing integration,…
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Throughout history, finance and banking have seamlessly adapted to integrate with evolving consumer lifestyles. Embedded Finance exemplifies this ongoing integration, strategically placing financial services directly within customer interactions at the moments they’re needed.
Industry experts have pinpointed embedded finance trends as a major development area, not only for financial institutions but also for non-financial companies seeking to participate in this burgeoning market. The embedded finance market is projected to experience explosive growth, surging from $63.2 billion in 2023 to a staggering $291.3 billion by 2033.
To capitalise on this opportunity and gain a competitive edge, businesses need to stay informed about the latest 2024 predictions and emerging trends within embedded banking. This is a space that evolves rapidly; and so must they.
Embedded Finance primer
Embedded finance refers to integrating financial services, such as checking accounts, loans, insurance, and investment tools, directly into the platforms of non-financial companies. This integration often occurs through partnerships between technology providers, traditional financial institutions, and the non-financial company itself.
While the concept of integrating financial products into non-financial transactions isn’t entirely new, embedded finance has gained significant momentum in recent years.
The term itself rose to prominence in the mid-to-late 2010s, coinciding with a confluence of trends in the fintech and retail app space. Additionally, the widespread adoption of application programming interfaces (APIs) and Software-as-a-Service (SaaS) models has facilitated the integration of financial services into non-financial platforms.
Trend 1: Integration with E-commerce Platforms
One of the key embedded finance trends in 2024 centres around its integration with e-commerce platforms. As online marketplaces become the future of retail, embedded banking offers a strategic weapon to fuel growth in this space.
Embedded finance lets marketplaces offer personalised financing at checkout, such as flexible payments or credit options. This can boost sales and customer satisfaction by giving them more buying power.
But the real game-changer might be loyalty programs. While traditional stores use loyalty programs, online marketplaces haven’t fully tapped this potential. By seamlessly combining finance and rewards, marketplaces can create a powerful tool to keep customers coming back for more.
Trend 2: Rise of Buy Now, Pay Later services
Another prominent embedded finance trend is the rise of Buy Now, Pay Later (BNPL) services. These services have become a familiar sight for online shoppers, appearing at checkout precisely when consumers are considering their budget.
BNPL solutions offer an alternative to traditional upfront payments by splitting the purchase amount into smaller instalments, typically spread over weeks or months, often with no interest charges.
Trend 3: Expansion into new sectors
The expansion of embedded finance beyond traditional sectors presents exciting possibilities. In the automotive industry, for example, connected and autonomous vehicles hold immense potential for integrating financial services.
This innovation has the potential to significantly enhance the user experience by offering on-the-go payments, streamlined vehicle financing, and convenient insurance options directly within the car itself.
Moreover, embedded banking can transform cars into mobile banking hubs, blurring the lines between financial services and automotive operations. This convergence creates opportunities for entirely new business models and revenue streams for both automotive manufacturers and financial institutions.
Trend 4: Partnerships with FinTech firms
The rise of embedded finance necessitates a strategic shift towards collaboration. This trend is particularly evident in partnerships between traditional financial institutions and fintech firms.
This strategic teamwork allows each party to leverage its strengths. Fintech companies bring innovative solutions and a focus on user experience, while established institutions provide robust financial infrastructure and regulatory expertise.
Trend 5: Prioritising Cybersecurity for Embedded Finance
As embedded banking continues to gain traction, ensuring the security of these transactions becomes paramount. This trend reflects the growing recognition that data security is not just a technical hurdle, but a strategic imperative. Financial institutions, fintech companies, and non-financial participants will all need to prioritise collaboration and information sharing to address emerging threats and vulnerabilities within the complex embedded banking ecosystem.
Trend 6: Regulatory Changes
Financial models like BNPL underscores the ongoing debate surrounding regulatory frameworks. While BNPL offers convenience, it has sparked discussions on the need for enhanced safeguards to protect consumer interests and promote responsible lending practices. Some call for stricter rules to prevent debt spirals and clear terms. However, fintechs find existing regulations hard to adapt to their evolving products.
Trend 7: Improved Analytics for Embedded Finance
Data is the lifeblood of informed decision-making, and B2B marketplaces, portals, and apps are no exception. By integrating financial services within the user experience, these platforms gain access to a rich data stream related to transactions, users, and the sales cycle.
Embedded finance solutions can further improve user experience by streamlining the consumer feedback process. This facilitates a deeper understanding of user pain points, paving the way for experience improvements. Ultimately, these data-driven insights inform future development efforts, ensuring a platform that caters effectively to user needs.
Outlook on embedded finance
Embedding financial services can create new revenue streams for businesses. For non-financial institutions, integrating financial services unlocks new revenue streams through partnerships with financial providers. This collaboration fosters the creation of additional services and strengthens relationships with both businesses and consumers.
It is not just new revenue streams that are at stake. Embedded finance trends are reaching a point where 2024 predictions suggest an environment ready to reward businesses with greater customer loyalty, growing existing revenue, and a sustainable flow of data to compound the business benefits of consumer behaviour with a better understanding of it.
Finance is going through a period of sustained growth while it digitalises and starts to offer more convenience to consumers.
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Embedded Finance, integrates financial and banking services into apps and services outside finance. It is at the forefront of this change.
Embedded Finance is a term that might sound foreign to many people but every digitally connected consumer would have experienced some aspect of it. It is designed to be practical and accessible. You “embed finance” to take or experience some financial action somewhere you would actually want to. Paying for an item or service through the vendor’s app, is a classic example.
User experiences on apps and websites are crucial to business growth. Overcoming issues that interrupt, for instance, a buying experience, can have a direct and major effect on business growth. So can the insertion and creation of business opportunities for financial services.
Increased revenue streams
Bringing embedded banking or other embedded finance benefits into non-financial contexts reduces the points where a consumer might abandon a transaction. It also creates new opportunities for additional transactions and the use or purchase of additional (embedded) financial services.
If they don’t have to leave the app or website, they are more likely to make a purchase; and if you can offer and convert the sale of a financial service tied to a purchase that they made, at the point where they made it – you have both increased and added new revenue from embedded finance solutions.
This creates new opportunities and brings financial services to a wider audience that are not especially familiar with them or with banking technology as a whole.
The more customers can use a service by finding it conveniently embedded outside that finance app, the more touchpoints there are to build both revenue and that customer relationship.
Enhance customer loyalty
Bank or financial services can cultivate greater customer loyalty by embedding finance options in the non-financial contexts that they would most likely want them.
Customers positively associate that convenience with the financial or banking service provider, and with the non-financial context itself. It is easy to incentivise the use of embedded finance options and the purchase of embedded financial services with discounts that latch onto the customer journey the consumer is already on.
A classic example of this (and the above) is buying a plane ticket, and having the option to add insurance, a hotel, or car rental, at a discounted rate, while completing a single transaction in a single, non-financial setting.
Tying those purchases together into loyalty rewards programmes is a simple and effective way to grow customer loyalty. This is also well evidenced by airlines rewarding air miles for packaging flight purchases with hotel, rental, insurance, and other partners.
Improved Customer Experience
The positive associations that go towards growing customer loyalty start with their experience of the non-finance app or site. Customer experience (CX) cultivates those positive associations and emotional ties that will keep them customers for a long time.
Embedded financial services that solve problems for customers and make their lives easier will always improve their experience. Packaging that in an experience that is enjoyable, through design elements, haptic feedback, sounds, or just customisation is all part of it.
Most of all, you can improve CX by offering a wide variety of embedded finance options. If customers feel an app or platform can be used for every transaction, and they like it there and trust it – they will stay there when faced with the option to move elsewhere.
Personalised offerings, built-in protections to assure their security, and expanding their access to financial tools will all help.
Access to Valuable Data via Embedded Finance
Through analysis of financial data, businesses can monitor actual performance precisely and adapt how to handle different situations.
Successful embedded finance benefits help the bottom line, but they also always deliver valuable data on how to serve the customer better and what firms can do next to support business growth.
Embedded finance allows for the capture of valuable data on customer behaviour and on behaviour towards embedded financial services in the non-financial contexts they get embedded in. This data capture gives unprecedented insights that will in turn lead to improved financial services and new opportunities for revenue generation.
Competitive Advantage
Embedded Finance presents clear opportunities for businesses to find and establish competitive advantages. The nature of embedded financial services also means that they can find advantages through initial deployments and long into the future.
Embedded finance benefits are so significant for business growth that they will become part of cross-industry business strategy for years to come. It offers quick wins for early adopters, and those who just deploy the best tech. It also brings growth to firms deploying embedded banking for the first time, as their customer base reacts to the deployment.
From that point forward, businesses can press that advantage home. They can use that advantage in consumer preferences to find better ways of serving them with the embedded applications they deploy.
Agile businesses can maintain those competitive advantages over sustained periods of time because of the availability of data to interpret.
How embedded finance transforms business growth
Embedded finance enables businesses to innovate quickly, adapting to market trends and customer demands more effectively.
The sooner platforms with embedded finance options are deployed, the sooner businesses can refine them. Familiarising consumers with their brand’s growing forays into consumer convenience supports growth.
Embedded Finance is one of the most beneficial inventions in banking that combines technology and finance fields. As people rely more on technology, they need a more practical and efficient platform to help them. They are part of the fabric of the digital future.
Embedded finance is revolutionising the financial landscape by seamlessly integrating financial services into non-financial contexts.
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What that means is empowering a moment in time with the ability to financially optimise how you handle it. Imagine buying a coffee and having the option to split the payment into instalments within the cafe’s app. Or booking a flight and receiving personalised travel insurance recommendations. All of this, based on your spending habits, preferences, and the flight you just booked.
In both scenarios, you never leave the one place you planned to visit – the cafe and the airline.
This is the power of embedded finance – it helps consumers by making financial services more accessible, convenient, and personalised. It brings financial options to the point of consumer decision making.
Seamless Transactions
Embedded finance means bringing the behaviour tied to transactions directly into platforms consumers already use.
Whether it’s paying for groceries, booking a ride, or splitting a restaurant bill with friends, embedded finance allows for instant and secure transactions within the familiar environment of the non-financial app. This also works the other way around – some financial apps allow for those decisions to all take place in their own app.
This saves time and effort – it just creates a more streamlined user experience and empowers consumers in the moment of their purchasing decision.
Enhanced Access to Credit
Embedded finance is opening doors for consumers who previously struggled with access to traditional credit options.
Buy Now, Pay Later (BNPL) services are the most prominent example of embedded finance. These offer buyers the flexibility to break purchases up into instalments tied to their personal circumstances. This helps with budgeting and allows young consumers to build a credit history, as traditional methods of doing so are less accessible. The rise of self-employment and the gig economy has meant consistent monthly payments are hard to predict for many consumers.
Embedded finance can facilitate real-time credit assessments based on a consumer’s spending behaviour within a given platform, enabling them to access microloans or other financial products they might not have otherwise qualified for.
Personalised Financial Services
The use of data analytics within embedded finance to personalise financial products and services for each consumer is having an impact beyond transactions.
By analysing a user’s spending habits, income streams, and financial goals within a platform, embedded finance providers can offer targeted recommendations. These can focus on saving accounts, investment opportunities, or even insurance products.
This level of personalisation empowers consumers to make informed financial decisions based on their unique circumstances.
Embedded Finance Case Studies
The impact of embedded finance is already being felt across various sectors:
Sector
Use Case
Benefit for Consumers
Retail
A retail app that allows customers to pay for their purchases and simultaneously apply for a store credit card with a pre-approved limit based on their past purchases.
Streamlines the checkout process and provides access to personalised credit options.
Travel
Travel booking platforms can leverage embedded finance to offer travellers real-time currency exchange. Travel insurance can be tailored to their itinerary with instant microloans for unexpected expenses.
Creates a more holistic and convenient travel experience.
Healthcare
Embedded finance can be integrated into healthcare platforms to facilitate co-pay payments. Offer personalised health insurance plans based on a user’s medical history. Provide financing options for medical procedures.
Empowers patients to manage their healthcare finances more effectively.
Future Trends
The future of embedded finance is full of possibility and it marks an era that is just beginning. We can expect to see:
Deeper integration: Financial services will become even more seamlessly integrated into everyday platforms, creating a truly frictionless financial experience.
AI-powered personalisation: Artificial intelligence will play a more prominent role in personalising financial products and services, offering hyper-targeted recommendations based on real-time data analysis.
Open banking: Open banking APis will further empower embedded finance by allowing secure access to a consumer’s financial data across different institutions, leading to a more holistic view of their financial health
Embedded finance is a game-changer for consumers. Seamless transactions, enhanced access to credit, and personalised financial services, are giving consumers the ability to take real-time control of their finances and make informed decisions.
As this technology continues to evolve, we can expect an even more convenient, personalised, and inclusive financial landscape. This consumer empowerment means more, new opportunities for financial services.
