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Embedded finance: Banks move into eCommerce

Embedded finance: Banks move into eCommerce


2 years ago

2 years ago


Consumers are demanding easier, more streamlined financial services, and embedded finance can help make this happen. Embedded finance helps make the customer experience easier by integrating necessary financial services in areas that are usually separate. In fact, Brazilian digital bank Nubank is one financial provider that has jumped in on the action, partnering with retailers to add an eCommerce section to their app – and they’re not the only ones seeing success. So, how can your finance brand offer embedded finance and what are the benefits?

What is embedded finance?

“ “We are living in an on-demand society, and as such, consumers are looking for more choice when it comes to payment options,” Richard Wormald, Mastercard Division President of Australasia. ”

Put simply, embedded finance is when financial services are integrated into non-financial websites. This has been occurring within other digital services with an example being Uber or Lyft, where consumers pay for their ride automatically by providing their payment details prior.

Embedded finance can help elevate your digital financial services by expanding what your consumers can do and access through your platform.

As Richard Wormald, Mastercard Division President of Australiasia states, “We are living in an on-demand society, and as such, consumers are looking for more choice when it comes to payment options…People want to be able to access and use their money how and when they want, using any form of device they choose.”

By making the customer experience easier and providing consumers with relevant financial services, you can satisfy a number of pain points helping to garner greater brand awareness and loyalty.

Ways your finance brand can get in on the action

Embedded finance is only just starting to ramp up globally with Lightyear Capital estimating embedded finance revenue will grow to nearly $230 billion by 2025. In fact, Ikea has recently begun offering financial services in-store after it bought a 49% stake in Ikano Bank. Even the online retail giant in Australia, Kogan, now offers superannuation, credit cards, and home loans.

So what are some ways your finance brand integrates embedded finance?

  • Embedded investing – Fintechs like Acorns and Raiz are investing clients’ spare change quickly, easily and automatically. Banks and other investing platforms can jump on the bandwagon and begin to create services that make investing easier and automatic.
  • Embedded insurance – Purchasing insurance is typically separate from purchasing the product, such as a car or home. Embedding insurance within the purchasing process starting to catch on, with Tesla now offering a tailored insurance program from the moment the car has been purchased.
  • Embedded lending – Rather than having to apply for a loan separately, ‘Buy Now, Pay Later’ (BNPL) schemes, such as Klarna or AfterPay, have created a loan scheme at the point of purchase.
  • Embedded shopping – Some finance brands are beginning to expand their digital platforms by providing access to online retailers within their app.

Two finance brands nailing embedded finance

While embedded finance remains in its infancy, there are a number of financial organisations jumping on to this new development early.

In Brazil, NuBank has entered the eCommerce space by offering online retail experiences within their app. Consumers will have access to special offers, discounts and coupons, as well as a more seamless shopping experience. By creating frictionless online shopping experiences, NuBank aims to retain current customers and continue to expand its current digital offerings.

Embedded finance: Banks move into eCommerce

In the UK, Caura is making the lives of car owners easier by enabling users to handle all vehicle-related admin, such as paying for city charges and car tax, in the one app. They’ve also embedded insurance within the app, by allowing users to access and insure their car with the top insurers like Aviva and Ageas.

The way of the future

The growing demand and need for convenient, frictionless and digital financial experiences are fueling the embedded finance space. At the heart of it, embedded finance is about addressing consumers’ pain points in a variety of areas that finance brands may have previously dismissed.

If your finance brand is looking to expand your digital offerings, retain current customers and improve brand loyalty, embedded finance is an area you should invest in.

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