Let’s explore how embedded finance (integrating financial services directly into non-financial products) is helping traditionally underserved populations access banking, payments, and credit services. We will also highlight the case studies of fintechs enabling inclusivity in healthcare, e-commerce, and mobility industries.
What is Embedded Finance?
The integration of financial services into non-financial offerings is known as embedded finance. These are all examples of embedded finance, including a department store’s branded credit card, an app that enables consumers to pay with a single click, and insurance offered by an online retailer. Effective embedded finance solutions provide customers with the financial alternatives they require, including a loan, payment program, insurance plan, or a straightforward payment method. For an extended period, integrated financial services, including airline credit cards, automobile rental insurance, and payment arrangements for high-value items, have been accessible.
Currently, embedded finance is the trend on the internet, as numerous online retailers offer banking services to their customers without the need to go to a separate bank. This trend is enabled by “banking-as-a-service” providers, who operate outside of the financial sector and incorporate financial services into the user interfaces of other businesses through application programming interfaces. Embedded finance is anticipated to experience rapid development in the coming years, providing businesses with significant benefits by improving the consumer experience and opening up massive new markets.
Explore How Embedded Finance Is Helping Traditionally Underserved Populations Access Banking, Payments, and Credit Services
Embedded Card Payments
Businesses can simplify the payment process for contractors and employees using debit cards. Companies can accept payments to their branded credit cards instead of checks or direct deposits. A business can partially or entirely cover the interchange charge for a white-label debit card in agreement with the issuer. One business that has simplified payments by utilizing cards is Paypal. Customers have the option to link their PayPal accounts with their bank accounts. An additional alternative is to submit an application for the currency card that the organization provides. Customers will have the ability to access their PayPal funds with this card directly. By utilizing a currency card, customers can immediately make purchases or withdraw cash from an ATM instead of waiting a few days for the funds to be deposited into their bank account.
Embedded Lending
In the past, borrowing money was as straightforward as visiting a bank or applying for a credit card. Embedded lending now enables consumers to apply for and obtain a loan at the time of purchase. Klarna and AfterPay are two examples of embedded lending use cases. Both options enable customers to divide substantial online purchases into more manageable monthly installments. For instance, a $100 payment can be divided into four $25 installments.
Embedded Investments
Most individuals regard investing as an activity that is too technical and beyond their capabilities. Embedded banking systems that expedite the investment process could potentially improve this situation. One such example is the Acorns program, which allows users to invest their spare change by simply tallying up their purchases. Acorns simplifies the process of investing. The user does not need to consider transferring funds to their account; the tool handles it. Acorns users are relieved of the burden of monitoring the value of individual equities or mutual funds, as their portfolios are automatically updated in response to market fluctuations.
Embedded Insurance
An intermediary, such as an insurance agent or broker, is unnecessary when purchasing a policy through embedded insurance programs. Insurance was previously required for the acquisition of a vehicle or residence. Additionally, it was an autonomous phase of the procedure. To expedite the process and increase profits, certain businesses have found methods to integrate the application for an insurance policy into making a significant purchase. Tesla Motors serves as an illustration of this. It provides a platform for insurance that enables users to effortlessly and quickly acquire the appropriate amount of coverage. Additionally, Tesla’s insurance policies are frequently more cost-effective than those offered by third-party vendors.
Embedded Banking
Embedded banking is different from embedded finance, despite the widespread misconception. There are numerous instances of businesses that offer banking services to replace the services provided by traditional banks. The Lyft debit card is an example of embedded banking, which enables the ride-sharing company to pay drivers instantaneously. Furthermore, the initiative enables chauffeurs to establish a personal savings account. Similarly, businesses may capitalize on Shopify’s embedded finance feature. Shopify’s banking feature encourages entrepreneurs to establish a business bank account rather than utilizing their personal accounts.
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Fintechs Enabling Inclusivity Through Embedded Finance
1. Healthcare: Making Quality Medical Care Affordable
Healthcare costs can significantly burden many people, preventing them from accessing necessary treatments. PayZen is solving this issue by offering a “care now, pay later” option. Using AI, they create interest-free payment plans directly integrated into hospital systems and linked with patient records. This solution helps low-income patients afford treatments and improves cash flow for healthcare providers, ensuring more people get the care they need without financial stress.
2. E-Commerce: Helping Small Businesses and Shoppers
Many people with poor or no credit history struggle to participate in online shopping. Affirm addresses this challenge by providing buy-now-pay-later (BNPL) options at checkout on e-commerce platforms. Their AI-driven system offers interest-free installments, making shopping easier for underserved groups. This not only provides access to traditional credit for 75% of shoppers but also boosts sales for small businesses.
3. Mobility: Creating Opportunities for Gig Workers
In emerging markets, buying a vehicle can be difficult, especially for people who want to work as ride-hailing drivers. Moove changes this by embedding financing options directly into platforms like Uber. Drivers can repay their loans based on their daily earnings, and the package also includes insurance and maintenance. Over 60% of drivers using Moove are now first-time vehicle owners, helping them earn more and improve their livelihoods.
Key Insights
- In healthcare, embedded finance makes treatments affordable for underserved populations.
- In e-commerce, BNPL services enable people without credit access to shop online and boost businesses’ sales.
- In mobility, embedded finance empowers gig workers with vehicle ownership, leading to better income opportunities.
Embedded finance is helping create a more inclusive world by making essential services accessible while driving economic growth and social impact.
Conclusion
Embedded finance transforms how financial services are delivered, making them more accessible and inclusive for traditionally underserved populations. Embedded finance breaks down barriers that have long excluded individuals and businesses from the financial system by seamlessly integrating banking, lending, payments, investments, and insurance into everyday platforms.
In healthcare, solutions like PayZen’s “care now, pay later” plans ensure that patients receive critical treatments without financial strain while providers benefit from improved cash flow. In e-commerce, Affirm’s buy-now-pay-later options empower consumers without access to traditional credit, boosting sales for merchants and enabling more inclusive participation in digital commerce. Similarly, Moove’s embedded financing for gig workers in the mobility sector provides a path to vehicle ownership, enhancing livelihoods in underbanked regions.
The projected revenue growth of embedded finance—expected to reach $384.8 billion by 2029—highlights its potential to reshape industries while creating social and economic value. By offering financial tools embedded in non-financial products and services, businesses enhance customer experiences, tap into new markets, and foster financial inclusivity.
As embedded finance continues to evolve, it promises to redefine financial access and equity, driving innovation and inclusivity across diverse sectors. This trend signals an exciting future where financial empowerment becomes a universal reality.
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