In this article we’ll be talking about the benefits of embedded finance to crowdfunding platforms and their customers, as well as the key things you should look for, and those you should avoid, when looking for the best provider.
Crowdfunding platforms enable projects that might otherwise struggle with getting off the ground, raise the funds they need by way of modest contributions made by large numbers of people.
Since these platforms aren’t themselves licensed financial institutions (FIs), yet their chief field of activity is precisely financial, embedded finance would seem like a natural solution.
Be that as it may, let’s begin at the beginning and take a quick look at the benefits that accrue to crowdfunding platforms and their customers upon implementing a suitable embedded finance solution.
Benefits to customers of crowdfunding platforms
The main benefit of embedded finance to customers is a smooth and frictionless user experience. When financial services are integrated by embedding them into a given company’s website or platform, users don’t have to navigate off-site, which saves time and removes the need for learning how to use different systems.
Another related benefit is in having all the necessary services available right then and there, via the same interface. This is important because today’s consumers expect a high level of convenience when it comes to online shopping and other activities.
For this reason, if the process of getting the services they need redirects them to another platform with a different look and feel, many will simply abandon the transaction and go somewhere else.
Benefits to crowdfunding platforms themselves
Arguably, the most immediately apparent benefit of embedded finance to crowdfunding platforms is the efficiency and savings enabled by procuring all the required financial solutions from a single provider.
Conversely, in-house, or outsourced, software development is both costly and time-consuming, while non-embedded third-party services delivered by multiple providers often result in recurring compatibility and other issues.
Given that embedded services function within a pre-existing website or platform, financial management becomes more transparent and straightforward. Furthermore, with embedded solutions, clients gain access to a wealth of customer data that wouldn’t be available under contract with a regular 3rd party provider. The insights extracted from this data can then be used to craft new, tailored products and services.
As an added bonus, the frictionless user experience that customers enjoy thanks to embedded finance builds trust and encourages positive word-of-mouth.
What to look for in an embedded finance provider
The first thing to consider when looking for a quality embedded finance provider is industry experience and know-how. The rapidly growing popularity of this key technology is bringing many new players on to the scene. And while some of them are, no doubt, trustworthy – it’s still advisable to err on the side of caution and go with a company sporting a solid track record.
Another consideration is the provider’s willingness to be a collaborative partner. Much of the beauty of embedded finance is in its flexibility and adaptability to a wide range of different needs. This means that you don’t have to settle for a company that’s only interested in selling you a standard package.
One way to gauge a provider’s collaborative spirit, or lack thereof, is by noting the level of effort it has shown in understanding your specific needs. A truly collaborative partner will likely set up an extensive client needs assessment, which is often indispensable for delivering an optimal solution.
An embedded service provider should also, ideally, be known for highly responsive customer support. Regardless of the quality of the services provided, various issues and questions do arise from time to time – and you don’t want to be left hanging for weeks in case of a major issue. For optimal customer support, the provider should have a dedicated team, so make sure you ascertain whether that is actually the case.
Finally, contact the provider, or alternatively – do some independent research, to figure out how quickly it is able to move funds between accounts. This is crucial because, if it takes days for funds to be credited into the proper account, some of your customers might begin to think twice about using your platform.
What to avoid in an embedded finance provider
Apart from avoiding whatever is opposite of the points outlined in the previous section, you should also be careful about pricing. Not all providers advertise the price of their services on their websites, and some include hidden fees and other fine print.
We’d also recommend you avoid providers that don’t offer integrated regulatory compliance. Becoming a licensed FI yourself is a costly and time-consuming process – and there are providers out there who’ll shoulder that responsibility on your behalf.
Furthermore, it’s best to avoid providers that have a less than spotless record of releasing customer refunds without delay. Reimbursement for unwanted products and services is frequently a rather sore point, so make sure that your provider of choice won’t cause any problems for you in this regard.
Lastly, if your platform is collecting donations for projects from around the world, it’s also imperative to avoid embedded service companies that don’t offer multi-currency support. Make a list of all the countries you’re serving, and those you plan to serve going forward, and see if the provider under consideration is able to process the respective currencies.
Crowdfunding platforms and embedded finance – natural allies?
In conclusion, crowdfunding platforms stand to gain a whole lot from embedded finance. This up-and-coming technology can reduce costs, free up time for tending to core functions, reduce or altogether eliminate worries about compliance with financial regulations, ensure a frictionless user experience, increase brand recognition and loyalty, and more.
If you take care to choose a quality provider, there are hardly any downsides that might crop up – and for this reason, we’re confident that crowdfunding platforms and embedded finance will gravitate ever closer to each other in the years to come.