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5 Use Cases of Embedded Finance Examples

5 Use Cases of Embedded Finance Examples

February 25, 2022

Embedded finance is a combination of financial and non-financial service providers. During the COVID-19 pandemic, this financial innovation became widely recognized. It assists businesses in attracting new customers and increasing revenue in financial services.

A study from Oracle predicts that the embedded finance market will reach $7 trillion in the next ten years, double the total value of the world's top 30 banks thanks to the help of fintech innovations. It's a big ambition, but that doesn't mean it's impossible. Because without many realizing it, implementing embedded finance is very close to our daily lives and gives a better user experience given by financial institutions.

The following are some examples of embedded financial product that are now widely used. Embed financial services include of:

1. Cashless Payments via embedded finance

It is the type of embedded finance that was first introduced to the general public. Traditional payment methods frequently cause consumers to reconsider making purchases.

For example, when you want to buy coffee at a small shop, they only accept cash payments; when you don't have cash. In the end, the coffee purchase transaction is cancelled. You fail to enjoy that tasty latte, and the shop loses some money.

However, a different scenario will happen if that coffee shop implements embedded payments. They can still accept transactions even if the customer only brings a smartphone. Customers only need to tap their smartphones to complete the transaction. There will be no long lines of customers because some are having difficulty finding the correct cash or inserting their debit cards.

2. Embedded Insurance and financial services

Embedded insurance from banking services or fintech will make insurance purchasing more accessible. Insurance products will be combined with a product that you genuinely require.

One of them is health insurance. Embedded finance allows users to get better coverage in health insurance while simultaneously offering better services in terms of preventive medicine. Thanks to the multiple payment options and transparent pricing, people can get the help that they need in urgent situations with a considerable amount of money due to better access to financial services given by insurance companies.

3. BNPL - Buy Now Pay Later credit system

Embedded credit has recently been the most popular form of embedded finance, such as embedded lending provided by financial service institutions to make payments easier. One widely used example is BNPL (Buy Now, Pay Later) provided by financial services providers or even non-financial companies. This method allows customers to pay for products later or split the bill at checkout. In conclusion, this helps transform the near future of embedded finance products, unlike traditional financial institutions that don't have this kind of feature before.

Klarna, a BNPL provider founded in Stockholm, Sweden, with a valuation of more than $46 billion, demonstrates the success of this method of services like. When social distancing policies are implemented, and people shop online more frequently, the use of Klarna increases and many financial companies start to adapt to this change to adopt embedded finance.

4. eCommerce

Another embedded finance use case is retail. Nowadays, you can find various payment method options when shopping online through a website or application. Some marketplaces accept credit cards, e-wallets, BNPL, and cryptocurrency payments. Everything can be done without leaving the website or application.

This implementation will not only increase customer engagement on the platform but will also increase customer trust. They will most likely transact again because the payment information is already recorded in the system, so they do not need to re-enter it.

5. Investments

Many people still believe that investing is a complicated process that is difficult to execute. The embedded investments banking program, on the other hand, can simplify the investment process.

Acorns enable companies to implement this investment model, which allows you to make investments by rounding payments. Let's say you just bought a shoe for $275. With Acorns, you can pay as much as $300, with $25 being the investment. Investing has never been easier!

Those are some examples of embedded finance. This financial model allows customers to access financial services that are not only easy but also affordable and personalized. Contact an embedded finance solutions provider like Ayoconnect to get started. Ayoconnect allows your customers to pay recurring bills via millions of payment points. As one of the fintech companies, we offer embedded finance providers to support fintech industry innovation. It's all for a faster and easier transactions.