Embedded finance (EmFi) has become an integral part of our everyday lives. From purchasing groceries on a delivery food platform to ordering a car via a ride sharing app, EmFi is working behind the scenes to link everything together.
EmFi can be defined as integrating or embedding financial services into a non-financial business’s infrastructure - without having to leave a business’s platform to access those financial services.
According to an embedded finance study from Bain & Company, in 2021 EmFi accounted for 2.6 trillion USD or 5 per cent of the US’s total financial transactions and predicts that it will exceed 7 trillion USD or over 10 per cent of the US’s transaction value by 2026. The report also found that payments and lending will continue to be the biggest EmFi services.
Customers and businesses can both reap the benefits of EmFi. For customers, they get a seamless user experience when making payments, while a business is able to offer financial services without the hassles of building its own financial infrastructure. A true winwin scenario for all parties involved.
Utilising FinTechs to Open New Revenue Streams with EmFi
The economic uncertainties have expedited the digitalisation of businesses. As part of this acceleration, we have seen a rise in non-financial platforms or marketplaces looking for new ways to make money and increase customer retention. A majority of them have already started offering financial services via fintech partnerships or licensing agreements. Such integration means high-growth startups and large enterprises can get access to sleek, scalable and affordable financial solutions.
By partnering with a leading fintech, highgrowth startups and large enterprises can get access to sleek, scalable and affordable financial solution which can create new revenue streams. With EmFi, businesses can manage their entire transaction lifecycle and turn complex payments, treasury, issuing, and FX flows into recurring revenue.
Before exploring a partnership, it’s important to evaluate all your options and find the right financial partner to help you expand your global reach while also leveraging its deep, sectorial expertise.
A great example of a vertical that has started utilising embedded finance via a fintech partnership is the food delivery sector. As a food delivery app, there are various restaurants ranging from those who focus on local produce to those who offer international cuisine. Each of these restaurants will likely have their own suppliers where they purchase produce, fish or spices from abroad. This can be incredibly expensive and burdensome for each restaurant to handle and maintain their cash flow.
Now imagine if that food delivery platform could offer instant access to the restaurants revenue after a food delivery is completed. Each restaurant would have the option to spin up virtual or physical cards so they could pay their global suppliers with their preferred and/or local currency. This would not only save time and money but also improve restaurant retention and most importantly, create new monetisation streams that are already part of the day-to-day operations.
EmFi can also create a closed loop customer experience, which means your end customer can manage their money in one platform instead of using third party financial providers like high-street banks - creating an enhanced payments journey for customers. Not to mention it offers greater control and more flexibility for a business that needs a customisable solution.
The Future is EmFi
EmFi has the potential to be the not-so-secret sauce in developing a successful business strategy for achieving cross-border growth. Whether you are using it to create new revenue streams, build customer loyalty or enhance your customer's payment journey and interaction with your business, EmFi can ensure you maintain your competitive advantage in today’s market.
