While the first wave of the financial industry innovations was about going mobile, the second wave is all about embedded finance services.
Yet, despite being a hot topic, the concept of embedded fintech still sounds confusing to many. 91% of surveyed companies are aware of the term but only partially understand what is embedded finance. Only 5% understand fully what it means.
As a financial software development provider , Binariks has contributed to embedded fintech projects and knows a lot about embedded banking uses across industries. This article on embedded financial technologies is a concise guide based on our expertise and additional research.
What is embedded finance
Embedded finance is a fintech market trend of integrating payment, lending, banking, and insurance features into non-financial products. Instead of going to a separate banking app, users can order services and complete financial transactions within the same solution.
"Non-financial companies increasingly are embedding financial services into their digital customer experiences—including payment options, financing, insurance, banking and investing. They're striving to deliver the right services at the right time to seamlessly move transactions forward, create relevant cross-sells and improve conversion rates."
Founder and CEO of Even Financial
One of the common examples of embedded finance products is in-app payments. A customer chooses a meal and pays for it in a single app. In-app "on credit" or "in installments" payments are another use case in e-commerce. With the embedded finance approach, app users don't have to go to banks to take a loan. They bypass filling out questionnaires and waiting for approval to get the loan right in an app. Besides, embedded technology is gaining popularity for healthcare payments as providers implement patient portals and telehealth solutions. Users can instantly pay for healthcare services online, avoiding cumbersome bank transactions.
"Embedded finance doesn't only have applications for consumers but also for businesses. The startup success stories for embedded finance usually involve companies that help consumers solve a big problem, for instance, how Stripe is a payment gateway for SMEs. Other B2B use cases that are less talked about is how ecommerce marketplaces could offer financial services that enable merchants to get paid, for instance."
CTO and co-founder at Verto
Three characteristics of an embedded finance app explained
Overall, there are three must-have characteristics of every embedded finance solution:
- The main app isn't a fintech solution. The word 'embedded' implies that fintech capabilities are added on top of a web or mobile app initially used for another purpose. These are usually marketplaces or vertical SaaS solutions.
- Customer journey continuity. Users don't have to leave the platform to complete financial, banking, or insurance operations. They start their journey, go through all its steps, and convert in the same place.
- The use of contextual data. When an app prompts users to make a move, it already offers the relevant action based on the situation and data analysis. The application takes into account who the user is and what they want to achieve. Such transactions are frictionless, meaning minimum additional actions or risk of rejections.
If an application meets these requirements, we can say it's an embedded finance app.
"Embedded finance has the ability to make people's lives better – if it performs as intended, most people won't even realize how frequently they interact with financial products on a day-to-day basis."
Chief Strategy and Growth Officer at Money20/20
What are the types of embedded finance?
Embedded finance examples are very versatile, from SMEs to large healthcare providers. Still, most apps fall into several broad categories, such as:
Thanks to embedded banking solutions, non-financial companies can offer users a branded checking account. It enables them to hold funds and complete payments without leaving the main platform.
Such banking opportunities are the most beneficial for sellers or service providers that use the platform to conduct business. For example, Shopify Balance enables Shopify store owners to get paid faster and avoid opening a separate business bank account.
In-app payments free users from the need to enter their credit card details manually. They can connect and save the preferred payment method to use it for 1-click transactions. It enhances user experience, reduces bounce rates, and stimulates more frequent purchases and loyalty. A common example of embedded finance payments is the Starbucks app that saves customers' debit or credit cards for future transactions.
Branded payment cards
Branded payment cards are a popular option in B2B platforms. These are usually corporate platforms for finance automation like Ramp. Such platforms enable businesses to order branded cards for their employees to have more control over their corporate spending and provide extended financial services.
Before an embedded lending infrastructure appeared, consumers needed to request traditional bank loans when they lacked money for big purchases. Such loans had high interest rates and were time-consuming to take. Embedded lending has made lending a breeze. Now, businesses can make lending a part of the checkout process with the buy now, pay later solutions like Klarna or Afterpay. When a buyer checks out, they can choose to pay in installments without interest.
Embedded insurance means people can get insured right on a non-financial website or app during checkout. It's usually implemented through partnerships with fintech companies that have embedded insurance as an option. When users are about to pay for the product or service, they see a prompt offering insurance as an add-on. Checking the tick is enough to add it to the total order.
Improve user experience by implementing embedded finance in your solution
Improve user experience by implementing embedded finance in your solution
Examples of embedded finance solutions
These companies have started as providers of different services, from online purchases to ride-sharing. But working on their software, they've decided to power the apps with embedded finance features. Here's what they've got:
The Uber platform that connects drivers with riders provides users with convenient embedded payments. They can choose between paying with cash and a range of payment methods, including debit and credit cards, PayPal, Venmo, and digital wallets. If users want to pay online, they can do it right in the app. They only need to add the preferred payment method and choose it when ordering a ride.
Shopify supports many embedded finance solutions like Shopify Pay or Shopify Balance. Yet, in this article, we want to highlight the Shopify Capital lending platform.
This platform enables merchants using Shopify to tap into fast funding for payroll, inventory, or marketing. Sellers can get funding quickly based on their track record of sales. Since Shopify relies on the existing data about applicants, they don't need to go through lengthy application processes. The funding is granted in days, and businesses return it as a percentage of their future sales.
While Shopify offers loans to merchants, Amazon has the EMI (Easy Monthly Installments) service for buyers. Consumers can request, acquire, and repay loans on the platform where they view and purchase products.
For example, a buyer purchasing a TV on Amazon can ask for EMI payments at the checkout. The platform will split the price into monthly installments automatically. When completing a transaction, buyers don't need to have the entire amount in their banking account. Amazon uses the pre-approved overdraft facility to deduct the necessary amount from the account monthly.
Other embedded finance companies
Besides the listed use cases of embedded finance, there are providers fully dedicated to embedded banking. These vendors gradually replace traditional banks and insurance companies with their fintech software. They are the new market leaders dictating fintech trends.
Embedded finance company
What it offers
A Chinese platform for mobile and online payments via e-wallets
An API for integrating fintech and digital finance services, including banking, personal finances, consumer payments, lending, and more
An online platform for merchants and shoppers to implement purchase financing at the checkout
A platform enabling websites and apps to accept payments and send payouts globally
A platform that allows merchants to provide warranty offers and protection plans
A buy-now-pay-later solution enabling installment loans for consumers
A solution enabling B2B manufacturers and wholesalers to receive upfront payments while their customer can pay later
An online marketplace that enables consumers to make quick purchases and pay for them later
Why consider creating your own payment app?
Why consider creating your own payment app?
How is the embedded finance industry now?
The embedded banking industry is not only growing. It becomes more versatile and gives birth to embedded finance sub-trends. Discover how embedded fintech looks in numbers and what applications of this technology dominate below.
Embedded banking and finance market overview
Embedded fintech is only gaining traction but has already reached the market value of $22.5 billion in the US only. By 2025, its size will increase to $230 billion .
The fact that 55% of non-financial businesses plan to offer embedded financial services in the next two years (and 18% within the next 12 months) proves that the market will keep growing. Only 8% of responders weren't sure about implementing embedded finance, comprising a minimal share of the participants.
Plans to offer embedded finance to customers
As to the types of embedded fintech, payment solutions dominate (and will keep dominating) the embedded finance market, followed by insurance and consumer lending. The graph below illustrates the changes happening from 2020 to 2025.
Hence, businesses are the most likely to invest in embedded payment and insurance capabilities in the next few years. If your company wants to compete in this market niche, you should consider adding such functionality to your app.
Top three embedded finance trends
Based on the recent publication in Forbes, the embedded finance industry is shaped by the following trends:
#1. Plug and play APIs
What only entered the market in the 2010s, now has become a leading trend in the fintech industry. Today there are tons of fintech providers offering services via API. Companies can pick services from multiple providers and combine them to meet unique customer and business needs with their products.
The growing popularity of APIs has made using them much easier and dropped the tech barriers to embedding fintech. Non-fintech companies looking for embedded fintech capabilities can effortlessly get them through API integrations. It cuts the development time necessary to implement such features into existing products.
#2. B2B applications
Talks about embedded banking usually boil down to the practical uses of built-in fintech in B2C products like Uber. However, embedded finance features have also started to appear in B2B solutions more frequently. Shopify, with its lending capabilities for merchants, is a good example.
Since the US B2B market keeps growing and will exceed $4,600 billion by 2025, the number of B2B services, including those with embedded banking features, will also increase. Hence, we will likely witness more platforms with fintech features for B2B companies soon.
#3. More domains
So far, four domains use embedded financial solutions the most, including retail and eCommerce (73%), travel and entertainment (53%), food and beverage (27%), and transport and logistics (47%). The healthcare, energy, utilities, and automotive sectors are still on their way to fintech with much lower adoption rates.
At the same time, the Follow The Money research by Forbes, sharing the insight from Weavr embedded payments company, names health, real estate, education, and employment as the industries with the highest embedded fintech potential.
Given these findings, we can assume that healthcare and some other domains will increase their share in the fintech market. So get ready to see more unexpected combinations of standard services with embedded fintech.
Read Also: Top 10 Features of a Food Delivery App
Embedded finance in healthcare
Our team views the healthcare sector as one of the most promising fields for implementing embedded fintech. In-app financial services greatly benefit patients and medical teams, keeping all operations in one place.
What does embedded finance in healthcare look like? Here are the most typical use cases:
- Convenient payments for online healthcare services
- Implementation of popular payment options for patients
- Financing over time with a third party when a patient cannot pay immediately
- Automated medical billing for healthcare providers and insurance companies
- Healthcare insurance services in third-party products
- Employee insurance services for corporations
Besides enhanced healthcare services, the implementation of embedded finance improves interoperability. Providers can record all operations in one system to manage finances.
Binariks has already completed several projects with embedded finances in healthcare, and they have proven to be highly efficient. So if you run a healthcare company, embedding financial services is a worthwhile upgrade.
Why invest in embedded finance software development
The spread of embedded finance services is an inevitable step in the digital transformation in banking and other industries. Yet besides following the global trends, businesses invest in embedded banking product development and integration for purely selfish reasons. Offering an all-in-one platform to their users, they can boost customer engagement, outperform competitors, and reap some other benefits listed below.
Better control over payments
Any company can become a fintech company with embedded finance software development. In other words, you won't need an intermediary to process payments and provide other financial services to your customers.
It gives you control over the payment workflow of users to ensure that everything happens smoothly. Apart from enhancing the customer experience, you get a chance to collect additional information about customer behavior patterns. Based on these findings, you can fine-tune your product to encourage more conversions.
Added value for customers
Instead of standard platforms where users order services to pay for them, take loans, or complete other transactions separately, they enjoy the whole pack of services in one place. It creates added value and makes the product look more advanced in the eyes of consumers.
Investing in embedded banking development, you supercharge your core platform to sell its functionality at a higher cost. The best thing about it is that consumers willingly pay more when the offer is worth it.
Higher customer retention
Software with embedded finance services is more convenient and, therefore, more likely to keep customers. Besides, the revenue from financial services enhances customer monetization while increasing the customer lifetime value. After being acquired, customers stay with you much longer and return to your company to order something again. This way, by embedding financial capabilities, you make your platform more profitable.
Increased attach rates
Personalization is one of the must-haves of embedded finance products. The software collects information about user activity and preferences in real-time to tailor the experience based on this data. As a result, the customer may get a recommendation to buy an add-on when they would benefit from it most. Such offers boost attach rates while feeling native and relevant to consumers.
By layering in financial services when other businesses in your market niche don't, you enhance your market position. Now, you can name solid reasons why your software product outperforms its alternatives, and everyone will agree with you. Customers see that your solution offers extra features not available in other products.
Thanks to the competitive advantage, you can engage more consumers and be better positioned for future market success. You become one of the first to go through digital transformation and lead the race. Even though only 5% of the surveyed B2C and B2B marketplaces, SaaS brands, and gig economy platforms offer embedded financial services so far, nearly 92% will implement them in the next five years. Hence, in some industries, you don't have much choice whether to use embedded fintech or not.
Binariks team for embedded fintech development
Despite all its benefits and the availability of API-based services, you should remember that embedded banking implementation requires professional expertise. You will need help with business analysis, coding, design, and maintenance at different stages. That's why you should consider Binariks as a reliable partner for embedded fintech adoption.
Binariks is a web and mobile app development provider specializing in fintech software. We create digital banking, money transaction, and loan management platforms from scratch or can assist you with API integrations.
- Run requirement discovery and business analysis for your project
- Recommend the most suitable finance solution based on your unique needs
- Find an optimum way to implement the chosen solution
- Integrate the selected third-party service with your platform
- Develop any additional features or refactor existing software
- Test how the embedded finance service works
- Maintain your system and implement the requested upgrades
Our company offers support both to tech companies working on custom embedded finance solutions and non-fintech providers. With our flexible collaboration models, we can assemble a dedicated team , hire remote specialists, or provide scope-related services to suit any business needs.
Looking for help with embedded finance development or other tech tasks? Let's talk about it !
Embedded banking is a trend affecting many industries, from eCommerce to healthcare. You can see it in ride-sharing apps like Uber, B2B marketplaces, and many other services. What does it mean for decision-makers?
If you decide on the future development of your company, consider implementing embedded finance capabilities in the products you offer. This will raise customer engagement, increase revenue, and make your brand more competitive.