Embedded finance – the integration of financial services within non-financial platforms – brings multiple transformative opportunities for marketplaces. These include things like improved user experience and loyalty through seamless transactions, streamlined customer journeys, new and increased revenue streams, higher financial inclusivity, enhanced decision-making capacity via customer insights, and more.
In this article, we’ll briefly discuss the main benefits of embedded finance, grouped into the following categories: enhanced user experience, increased revenue streams, wider market reach, and personalized financial products and services.
Let’s dig in!
Enhanced user experience
Without embedded finance solutions, to complete a transaction, users would typically have to navigate multiple interfaces, platforms, and external payment gateways. This is not only time-consuming, but also prone to failure, often leading to users abandoning their carts out of frustration.
Luckily, by integrating financial services directly into their systems, marketplaces can ensure a truly frictionless shopping experience that eliminates the need for going off-site altogether.
In addition to simply being more convenient, embedded finance solutions enhance trust, as payments and other transactions are all handled within an environment familiar to the customer. They also facilitate launching effective, tailored upselling and cross-selling campaigns, where extra offerings are made available in the checkout process itself.
At the end of the day, the security and convenience provided by embedded finance translate into higher conversion rates and higher revenue. Speaking of revenue…
Increased revenue streams
Embedded finance helps marketplaces boost their revenue in several key ways. For one, marketplaces can earn from both the sale of goods or services, and from transactions that generate fees payable by the customer.
Another revenue stream can be easily secured by offering financial products, such as loans or insurance, within the marketplace and earning commission on each sale. This allows marketplaces to further diversify their revenue base and create a multi-dimensional business model that’s less susceptible to fluctuations that often come with a single income source.
No less importantly, embedded finance enables marketplaces to pursue strategic partnerships with financial institutions. These can help both with expanding the range of services offered, and with finding avenues for revenue sharing. The partnering financial institutions benefit from an expanded customer base, while marketplaces gain from enhanced financial offerings and associated revenue streams.
Wider market reach
Embedded finance solutions enable cross-border transactions with integrated SEPA and SWIFT payments. This effectively brings down geographical barriers, allowing marketplaces to seamlessly transact across multiple jurisdictions and make use of previously inaccessible market opportunities.
Furthermore, by providing customers with a unified shopping experience, embedded finance helps marketplaces to expand their user base. The capacity to cater to a wider audience is also enhanced by financial inclusivity, whereby customers are provided with multiple payment options, such as credit/debit cards, digital wallets, cryptocurrencies, or global payment gateways. This enables marketplaces to accommodate a much more diverse range of customers, irrespective of their banking preferences or location.
Personalized financial products and services
Last but not least, embedded finance provides marketplaces with a wealth of data on their customers. The insights gained by a thorough analysis of user behavior, transaction history, and preferences make it possible to develop and offer personalized financial products and services to their customers.
For instance, based on a user’s buying patterns, a marketplace can suggest a suitable “Buy Now Pay Later” scheme or a specific installment plan. Similarly, users identified as frequent travelers might be offered tailored insurance products or currency exchange rates.
Data-driven financial suggestions offered to customers builds trust and establishes marketplaces as credible advisors. Moreover, high levels of personalization enhances user engagement and loyalty – customers are more likely to return to a platform that understands their needs and provides tailored solutions.
In today’s digital world, user experience is king. And to stay ahead, businesses need to go above and beyond for their customers. Embedded finance offers a clear solution, combining better user experiences with more ways to earn, a broader audience reach, and tailored services. By tapping into these benefits, marketplaces can grow stronger and stand out in a crowded online space.