Embedded finance has completely reinvented the way customers interact with financial services, especially in the scope of non-financial apps. Think about paying for your Uber ride without ever leaving the app—that’s embedded finance in action. By transforming how financial services are delivered, it creates substantial opportunities for both fintech and non-finance businesses.
Currently, the global embedded finance market value is estimated at $111.72 billion. With customers’ expectations becoming more geared toward convenience, Precedence Research expects it to reach $1,436.2 billion by 2033, growing at a CAGR of 32.81% over the period 2024-2033.
If you’re yet to harness the potential of this tech trend, now is the time to jump on board. Let’s dive into the world of embedded finance and explore its benefits, opportunities, and implementation steps.
What is embedded finance?
At its core, embedded finance is the term to describe when you integrate financial services, such as payments or lending, into platforms that aren’t traditionally financial. It eliminates the need for customers to visit a bank or financial institution separately. Instead, users can access these services directly within the apps or websites they use, creating a smoother, more convenient experience.
Embedded finance makes financial services more accessible, revolutionizing how businesses engage with their customers.
How does embedded finance work?
Embedded finance works through collaboration. A non-financial company partners with a financial service provider, often through APIs (Application Programming Interfaces). These APIs help add services like payments or loans to an existing platform. Essentially, it enables you to plug in a service module to enhance the functionality of your product.
For users, the process is almost invisible. They shop online, select “buy now, pay later” at checkout, and the financial magic happens in the background without disrupting their experience.
The most common types of embedded finance
Embedded finance solutions come in many forms, each designed to meet specific needs. Originally, this approach was associated mainly with in-app payments for online marketplaces like Amazon, but it has greatly diversified over the years. Here are several common types of modern embedded finance:
- Payments: Users can pay without being redirected outside an app or website. It allows businesses to have finer control over user experience since customers stay within the brand’s domain from the first interaction to the finish line.
- Lending: This feature enables merchants to present several financing options to customers at the point of sale. This includes the “buy now, pay later” (BNPL) model, loans, and credit lines.
- Insurance: Users can access insurance options directly within the buying process, typically at checkout. These can include extended warranty, travel insurance, and so on.
- Investments: This enables users to invest money through non-financial platforms, like a shopping app offering cashback investment programs. Also, investment functionality can be integrated into a banking or financial app to help users buy and sell stocks without visiting dedicated investment platforms. Cash App and Revolut are prominent examples of embedded finance meeting investment features.
Although these types are the most common, there is enough room for creativity if you want to stray away from the common options.
Benefits of embedded finance
When businesses adopt embed finance, they do more than simply start using a tool—they’re incorporating a strategy for growing faster and smarter while improving user experience. Let’s take a look at several main outcomes of embedded finance for enterprises and their customers.
For customers
- Increased convenience. With services like embedded payments, customers can skip the hassle of switching apps or managing multiple accounts. Paying for a coffee, booking a flight, or splitting a bill can happen instantly, all in one place.
- Personalized offers. Platforms using embedded finance often rely on user data to provide tailored financial solutions. For example, a shopping app might offer flexible BNPL options based on a user’s purchase history.
For businesses
- New revenue streams. Embedded finance allows businesses to earn through commissions, partnerships, or transaction fees. For instance, offering insurance at checkout can add a profitable service without creating extra work for your enterprise.
- Higher customer retention. By making transactions seamless and providing added value, businesses can increase loyalty. Customers are more likely to return to a platform that anticipates their needs and simplifies their experience. Also, conducting transactions through a platform users already know works toward reinforcing their trust and boosting engagement.
- Data-driven insights. Embedded finance integration allows you to gather valuable data on customer preferences and behaviors. This can help refine your offering, target the right audience, and stay in tune with market trends.
How to integrate embedded finance into your business
Integrating embedded finance into your business may seem complex, but it doesn’t have to be. We’ll walk you through the key steps, from choosing the right financial services to finding the perfect technology partner.
Step 1: Decide on the financial services
Spend some time figuring out which financial services fit your customers and goals before embedding finance into your business. Do your customers need easier ways to make payments? Or would your platform be distinguished by features like embedded investment and insurance? The best way to generate value for your users is to focus on their pain points.
Consider your industry and what your customers are likely to struggle with. For instance, an e-commerce platform may benefit from integrating payment plans, while a gig economy app might attract users with quick payouts. Understanding your niche helps you focus on services that truly enhance your offering.
Step 2: Choose the right technology partner
Creating embedded finance solutions requires more than just great ideas—it demands technical precision. Partnering with a reliable software development company ensures you have the right expertise to navigate emerging challenges. So, why should you seek a trusted tech partner? Here are several main benefits to consider:
- Expertise and experience. A technology partner brings invaluable industry knowledge to the table. Eastern Peak, for example, has extensive experience in embedded finance projects, ensuring solutions are both innovative and reliable. Our experts can help you avoid common pitfalls and implement financial features that align perfectly with your existing offering and enhance it.
- Customization. Every business is unique, and so are its financial needs. A strong technology partner offers tailored solutions to fit your specific goals. Whether you need a payment gateway, lending feature, or personalized offers, a tech partner creates systems that fit your brand and audience.
- Integration with existing systems. Embedded finance doesn’t have to disrupt your current operations. An experienced team ensures smooth integration with your existing systems, minimizing downtime.
- Scalability. As your business grows, so will your financial service needs. A capable partner builds solutions that scale effortlessly. Eastern Peak designs embedded finance systems that can handle increased traffic, new features, and expanding customer bases without compromising performance.
- Ongoing support. The journey doesn’t end after deployment. Continuous support is vital to keep your systems running smoothly. Software development companies provide regular updates, quick issue resolution, and proactive monitoring to ensure your embedded finance features remain effective and secure over time.
Step 3: Develop a seamless user experience
Creating a smooth, intuitive user experience is crucial for successfully implementing embedded fintech. Customers expect financial services to blend naturally into your platform, without disruptions or confusion. Prioritize simplicity and functionality to meet these expectations.
Here are a few best practices:
- Streamlined design: Ensure the interface for financial features matches your platform’s overall design. Consistent visuals and navigation make embedded finance feel like an organic part of your system.
- Clear communication: Use straightforward language to explain financial services, fees, or processes. Transparency builds trust and encourages adoption.
- Minimal clicks: Reduce the steps users must take to complete actions like payments or investments. Fewer barriers mean higher satisfaction.
Also, make sure to follow the latest embedded finance trends. Add functionalities that respond to new customer demands—for example AI-powered personalization. A good customer experience won’t only get you customers, but will also let you keep a leading position on the market.
Step 4: Ensure compliance and security
Entering the realm of embedded payments presents a new challenge: managing sensitive financial data and transactions. Businesses must comply with strict security standards and navigate complicated regulatory requirements in order to function in this environment.
This is especially important when services are provided internationally because different jurisdictions have distinct legal requirements.
Compliance with industry laws ensures both legal operation and customer trust, so make sure to study relevant requirements in depth. Key standards and regulations to consider include the following:
- GDPR (General Data Protection Regulation) for data privacy when handling personal data of EU residents;
- AML (Anti-Money Laundering) to prevent financial crimes; and
- PCI DSS for secure processing of cardholder data during transactions.
Beyond compliance, robust security is also essential. Encryption, multi-factor authentication, and regular security audits help prevent cyberattacks and data breaches. These measures protect user information and uphold platform integrity.
If you’re not sure how to approach this subject, partnering with legal and security experts can greatly simplify the process. They can help configure data protection protocols, introduce sufficient protective measures, and ensure adherence to evolving laws.
Step 5: Test, launch, and iterate
Implementing integrated finance is just one part of the process. To increase your chances for success, you need to ensure quality and focus on delivering ongoing improvements to your offering. Let’s review the main stages that bring you closer to the seamless release of your product.
Testing and QA
Before introducing new features to your customers, conduct thorough testing. You need to confirm all components work as expected, especially considering the sensitive nature of financial services.
Prioritize security testing to find vulnerabilities in areas like transactions and the handling of user data. Also, consider conducting user testing as a way to gather feedback and identify possibilities to improve the experience.
Launch
A well-timed and prepared launch lays the groundwork for success. Launch to a small audience first, so that you can address any issues and bugs before a larger rollout. Track performance metrics and test scalability under different loads.
Iterating
After launch, it’s critical to iterate based on user behavior and feedback. Monitor how customers interact with the new features and address any pain points. Regularly update your offering to align it with evolving user needs and industry trends.
Iteration helps your platform stay competitive and deliver lasting value.
Wrapping up
Embedded finance solutions present a considerable opportunity when done right. By enhancing user experience and getting access to new revenue streams, these innovations position your business ahead of the competition. With careful planning and the right strategy, embedding finance can become a powerful driver of growth.
Still have doubts about how embedded finance works and, more importantly, how you can start integrating it into your solutions? The journey is easier with a reliable technology partner supporting you every step of the way. Contact our team, and let’s bring your dream app to life.
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