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Why is Embedded Financial Service Is The Next Big Thing?

Why is Embedded Financial Service Is The Next Big Thing?

October 13, 2022

The world is continuously changing and so are the people. One obvious example is how the rapid growth of technology has affected consumer behaviour. Technology gives people unlimited access to information, encouraging them to demand products and services that tend to their needs.

In reciprocity, technology will continue to evolve to support consumer demands in many industries, from financial to non-financial companies. That’s why these days we’ve seen many digital products offered by many companies.

Embedded finance is often perceived as the next big thing, but what is embedded finance really? Is it really a big deal for those not involved with the fintech-embedded finance world? And what does the next big thing mean? We will cover those questions for you below.

Understanding embedded financial service and how it works

Embedded finance, to put it simply, refers to the integration of financial instruments or services—typically obtained through a bank—into the goods or services of a non-financial organization. For example, the conventional method of getting a loan has a customer go to a physical bank to obtain a loan. If they are buyers, they must spend hours filling out paperwork before getting trade credit. These require time and energy, not including money if you need to travel to reach the bank. Thanks to the advancements in embedded financial services, those services can be done quickly at the point of sale.

A report from Future Market Insights states that embedded finance is estimated to reach $248.4 billion in net value by 2032. This fintech product will unlock a huge market opportunity, thus improving customer experience significantly. Fintech embedded finance uses several methods to be able to work. One of these methods is investing in a digital platform of an established brand. Another method includes partnering with a company that owns products with financial infrastructure embedded into them. However, these embedded financial service methods rely heavily on APIs (Application Programming Interface).

The purpose of APIs is to make simpler interactions between apps or softwares. It consists of a collection of instructions that connect two software to facilitate the exchange of data, letting the software communicate with each other. APIs work as a “gateway” system between clients, banks, and businesses.

Additionally, businesses can construct their own solutions and manage their technology by plugging into particular banking and/or payment systems and procedures using those APIs. Fintech embedded finance enables any business to integrate offline or online payments through BaaS and APIs.

The benefit of entities using embedded finance

Here are some benefits that embedded financial services bring:

  • Ease of use and consumer convenience: Helps to solve consumers’ problems, improves customer service, and increases brand loyalty.
  • Better insights: Fintech embedded finance helps understand consumers, their spending patterns, and demands.
  • Profitability and simplicity of use for brands: Thanks to increased and diverse revenue streams, businesses may easily “lease” access to various banking stack components to improve the user experience.
  • Many different fields: Offline and online businesses can benefit from things like wealth management and insurance.

Ayoconnect’s embedded finance services

Before releasing a financial product, it’s essential to conduct a thorough analysis. One vital component that you need to examine is the product’s availability and accessibility to partners. This is where you need APIs to make a financial product available and accessible to partners. Unfortunately, many traditional financial institutions still haven’t implemented APIs to their ecosystem. Many companies fail to realize that APIs are just as crucial as offering a financial product. In fact, APIs can help them create more personalized financial products, providing solutions that are tailored to customers’ needs. It doesn’t stop there; APIs implementation can also improve the automation process. No more manual tasks so doing business will feel effortless.

Businesses that want to take advantage of these new prospects should evaluate their current tools. Furthermore, they also need to specify which tools can be easily improved by an embedded financial service solution.

Ayoconnect can help companies or brands put their fintech-embedded finance plans into action. As Indonesia’s largest API marketplace and the leading financial API developer, you can monetize and expand your business in a fast and scalable way. Click here to choose a wide range of white-label financial products on Ayoconnect’s API platform!