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Benefits of embedded finance for businesses and consumers

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Although embedded finance has been around for a while now, its adoption has been rising at breakneck speed over the past several years. This is clearly reflected in the estimate that embedded financial services will bring in $230B in revenue in 2025, which is a whopping ten-fold increase over 2020.

Given that 88% of companies switching to embedded finance have reported increased engagement, and 85% have said that it helps them acquire new customers, the growth projection indicated above isn’t exactly surprising.

By meeting customers where they are with a financial option they need right that moment, embedded finance makes for a much smoother customer journey and higher customer satisfaction. 

Think of it this way, rather than having the customer go to the bank, embedded finance brings the bank to the customer.

Embedded finance is beneficial to both customers and businesses. To make the case even stronger, we’ve selected a handful of key ways in which those benefits can be realised. 

Higher revenue & larger customer base

The time most people have to dedicate to shopping is very limited, which explains, at least in part, why they expect it to be as convenient as possible.

The more steps there are between a customer and a purchase, the more likely the customer is to forgo it altogether. No wonder the rate at which customers abandon their carts at e-shops has been hovering around 70% for years.

Embedded finance enables businesses to create any number of additional revenue streams, while offering a better service to their customers. For instance, with this solution, all transaction fees are collected directly by the company’s own platform, rather than by the bank. This brings in extra revenue and makes it possible to offer more competitive rates.

Making purchases easier and less expensive for customers, while simultaneously providing additional services is also a sure-fire way to expand one’s customer base.

More options, less time and effort required

Financial services available directly on the market are rarely designed in a customer-friendly manner. Embedded financial services, on the contrary, are tailored to meet specific needs at specific points of sale. For instance, removing such consumer pain points as too many unnecessary clicks make them more likely to complete the purchase and become repeat customers.

With embedding, businesses also gain the ability to gather customer data, which is then translated into actionable insights that make it possible to customise services to the utmost degree.

In addition, embedded services come with an attractive, easy-to-use interface that increases the likelihood of purchase and upselling. Giving consumers the option to buy something extra without any further steps or direct interaction with a third party outside the platform is a highly effective strategy.

These are just a few examples of how embedded financial services can benefit the end user. The important point here is that customers gain a huge variety of new services, which enables them to easily find the most convenient option for any given purchase.

The future of embedded financial services

As we’ve seen, embedded financial services are a win-win for customers and businesses alike. Customers benefit from a wider range of tailored, user-friendly services, while companies benefit by introducing additional revenue streams and developing new solutions.

Embedded financial services, enabled by fintechs and banking-as-a-service providers, is a fertile ground for relentless innovation. New solutions are being continuously developed to offer new methods to save, make payments, and much more.

There’s clearly a lot of demand for such services, and the near-future projections for this market segment speak to it loud and clear. Many new developments are sure to follow soon – and rest assured, we’ll keep you informed about them.

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