The Slithering of Embedded Finance

In this day and age, you cannot escape fintech even if your job is unrelated to the field or finance in general. Now, fintech has been embedded everywhere and this is how embedded finance (EF) got its name!

What’s embedded finance?

We’ve talked about EF briefly as one of the possible emerging fintech trends in 2023. As the name suggests, it simply means the integration of finance in several entities that don’t necessarily relate to regular financial institutions (FI) such as healthcare or transportation. This allows customers to access financial services without having to leave the platform or application they are using.

This process involves three parties; a non-finance company, an EF infrastructure company, and a FI. Take for example Zara, as a non-fintech company, it collaborates with an EF company that provides Zara with the necessary APIs to enable services like payments, wallets, and cards through a FI. That’s basically how you are able to buy things through their website or app (Not an AD btw!) This is called embedded banking.

There are a few more types of EF that you should know!

Embedded payments

No card, no problem! Embedded payments are when consumers use their mobile phone or another connected device to pay for things instead of carrying a separate payment card or cash. Think of E-wallets and Fawry.

Embedded lending

This type of lending allows businesses to offer their customers access to credit directly within their platform or application. This leads to improvement in the customer experience as well as increasing revenue growth. BNPL is one popular form of embedded lending so customers can buy whatever they want even if they don’t have the money for it.

Embedded insurance

Embedded insurance is when you buy any insured product or service. Car insurance, for instance, falls under the embedded insurance umbrella. This way, the car manufacturer is obliged to cover the cost of maintenance or repairs in the future, if needed.

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