Embedded finance means that non-financial businesses become a part of the financing process, by embedding financing as a part of their service.
Embedded finance is reshaping the financial landscape by integrating seamless financial services directly into a wide array of non-financial digital ecosystems.
This innovative approach enables companies to offer financial products where their customers are already engaged, be it shopping online, using an invoicing service, or managing business operations.
At its core, embedded finance allows for a more intuitive customer experience by merging financial processes with everyday activities.
Customers can access lending, make payments, purchase insurance, and invest within the platforms they already use, without the need to interact with traditional banking interfaces.
AExpert Market Research Allied Market Research
The estimated market size for embedded finance in 2024.
A forecasted growth at a compound annual growth rate (CAGR).
By the end of 2032, the market size is expected to reach.
By incorporating embedded finance directly into your digital offerings, you can significantly elevate customer satisfaction and open up new revenue streams.
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Typically embedded finance refers to the integration of financial services or products into non-financial platforms or apps, such as e-commerce websites, social media platforms, or mobile apps. It allows customers to access financial services seamlessly within the context of their daily activities, without having to navigate to a separate banking or financing platform. Embedded finance also allows financial platforms, such as lending or brokering to expand their offering by integrating complementary services on their platform.
For example, an e-commerce platform could offer an integrated lending service, allowing the customers to get a financing for their purchases without leaving the e-commerce platform. Another example is an invoicing app that allows users to finance their invoices without leaving the app. Embedded finance can be used also in launching partnerships between financial institutions. For example a consumer lending broker can easily embed insurance services as a part of their platform.
Potential to improve financial inclusion by making financial services more accessible and convenient for a wider range of customers.
Embedded finance and banking as a service (BaaS) are both terms used to describe the integration of financial services into non-financial platforms or applications. However, they differ in their focus and scope. Embedded finance typically refers to the integration of specific financial products or services, such as insurances or lending, into non-financial platforms or applications. The goal of embedded finance is to make financial services more seamless and convenient for users. Banking as a service, on the other hand, is a broader concept that refers to the provision of a full suite of banking services, including deposit accounts, card issuance, and lending, to third-party platforms or applications. BaaS enables non-banking companies, such as fintech startups or e-commerce platforms, to offer banking services to their customers without having to build their own banking infrastructure. In summary, while embedded finance focuses on the integration of specific financial products or services, BaaS provides a full suite of banking services to third-party platforms or applications.
According to a report by FutureMarketInsights.compublished in 2022, the global embedded finance market is likely to grow at a strong CAGR of 16.4% between 2022 and 2032. The market is valued at US$ 54.3 Billion in 2022 and is likely to reach US$ 248.4 Billion by 2032. The report highlights the rising number of fintech brands expanding their roots in the insurance market and enhancing innovative platforms building contextual insurance products and services, which is accelerating the growth of the embedded finance market in new market spaces. As digitization increases in the corporate structure, the digital lending sector flourishes and transforms. Fintech companies are evolving and introducing new technologies to enhance the customer experience. The Indian insurance industry has also helped in booming the embedded finance market, easing the complex processes through cutting-edge fintech. It is important to note that the projections are subject to change as the market evolves and new trends emerge.
Increased Adoption of Embedded Finance Platforms: The use of embedded finance platforms is rapidly increasing in the embedded finance space. Using embedded finance platforms financial services can reduce their go to market -time to the zero, also enabling businesses to integrate financial services more easily and efficiently into their products or services.
Personalization and Customization: Embedded finance providers are increasingly offering personalized and customized solutions to meet the unique needs of customers. This trend is expected to continue, with businesses leveraging data and technology to provide tailored financial products and services.
Collaboration between Fintechs and Banks: Collaboration between fintechs and traditional banks is on the rise, with both sides recognizing the benefits of working together. This trend is expected to continue, with more partnerships and collaborations between these two sectors.
Increasing focus on Financial Inclusion: Embedded finance has the potential to improve financial inclusion by making financial services more accessible and convenient for a wider range of customers. This trend is expected to grow, with businesses and policymakers alike recognizing the importance of financial inclusion for sustainable economic growth.