Instant payment methods have become an integral part of our daily lives. Have you ever considered the foundation of these digital transactions?  The simple answer is – embedded finance. The integration of financial tools or services—typically obtained through a bank—into the goods or services of a non-financial organization is known as embedded finance. The "Buy Now Pay Later" (or "BNPL") trend spreading across online retail platforms is an example of embedded finance, as would be an e-wallet integrated into an e-commerce platform, UPI, etc. Whether it's a loan, payment program, insurance policy, or another financial alternative, effective integrated finance solutions meet the consumer where they are. 

Some embedded financial services, such as credit cards for airlines, insurance for auto rentals, and payment plans for expensive goods, have been available for some time. Now that e-commerce businesses are providing financial services directly on their websites rather than sending clients to a bank, embedded finance is gaining traction online. This phenomenon is made possible by third-party "banking-as-a-service" providers who integrate financial services into non-financial enterprises' user interfaces through the use of APIs. 

The use of embedded finance has increased recently and is predicted to grow rapidly. According to market research, embedded financial services will generate USD 7.2 trillion in revenue, opening up a market potential greater than the current combined worth of all FinTech companies, the largest international banks, and insurance companies. 

The largest-ever independent survey on attitudes toward embedded finance was commissioned. According to respondents, 73% of businesses intend to introduce embedded financial services in the next 2 years and 18% in the next 12 months. The possibility of creating new, personalized solutions, customer journeys, and methods to enhance the customer experience is what has so many organizations interested in embedded finance. According to EY, the added pressure from consumers who grew accustomed to utilizing financial services through non-traditional channels during the pandemic has amplified that enthusiasm. According to a recent EY survey on shifting consumer attitudes, 63% of consumers would "highly value" embedded finance and open banking solutions that link and customize their experiences across third-party ecosystems. 

Embedded finance is the next big thing in the FinTech world and has evolved the way we bank, borrow and invest. The following are the areas where embedded finance has taken over traditional management methods by offering user-centric alternatives. 

Banking

The process of integrating financial solutions with a company's platform or app through APIs is known as embedded banking. It serves as a catch-all phrase for various financial services, including lending, wearables, contactless payments, card issuance, vIBANs, and bank transfers. 

Payments

With Embedded Payments, customers can pay by clicking a button. They may pay without navigating between apps, which expedites checkout and payment settlement procedures and provides a great user experience. Embedded payments are a common feature of payroll automation software and many food delivery applications. 

Lending and Investments

Numerous non-financial companies have entered the financial sector to allow customers to obtain credit at the time of purchase. It does away with the need for intermediaries, drawn-out procedures, and a ton of paperwork. By providing a single platform for managing and investing money, embedded finance streamlines the investment process. It is a safety feature that enables customers to invest in various financial assets without leaving the platform. 

Cards

When a user regularly makes purchases from a seller, embedded cards can be used in place of credit cards and debit cards.  It enables users to electronically transfer money to cards so they can make purchases up to the amount of the transfer. These cards outperform conventional cards in terms of cost and security. These cards can be smart cards, corporate cards, virtual cards, expenditure cards, etc. 

Many non-financial businesses are investing in the market for embedded finance, which is expanding quickly. In essence, because of this incorporation of financial technology onto a non-financial platform, every company would seem to eventually transform into a FinTech in some way. As it attempts to break into the market through a number of use cases, embedded finance appears to be moving in the direction of becoming the business model of the future. It is one among many other technologies which will eventually shape the future of FinTech. 

An in-depth discussion on these and many other trends including embedded finance, Web3, metaverse, blockchain, decentralized finance, and more will be featured at the upcoming Dubai FinTech Summit, taking place on 8-9 May 2023 at Madinat Jumeirah in Dubai. 

You can book your tickets to the summit here.  

About Dubai FinTech Summit  

Dubai FinTech Summit is a thought-leadership-driven, business-focused global event that will deep dive into the latest challenges and technology trends in the financial services sector. 

Dubai FinTech Summit sets the standard for financial innovation in the region by connecting global FinTech experts, technology innovators and startups with pre-qualified CFOs, CEOs, CTOs, Heads of Business Transformation, Chief Digital Officers, Heads of Innovation, government authorities, and FinTech investors.

Oganised by Dubai International Financial Center (DIFC), the event features exciting keynotes, enterprise use-case presentations, product showcase, panel discussions and tech talks. Witness next-gen FinTech solutions from global tech leaders and explore their relevance and impact on organizations.

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