The age of embedded finance

October 11, 2023
What is embedded finance and why is it changing the financial industry? Learn more about integrated financial and payment services in this article.

Our experience building a fintech platform is the excitement of seeing builders build an awesome and completely new type of application on our platform. Sometimes you haven’t even remotely thought about how your platform might fit into that solution. We want to capture some of the exciting new trends we see in the embedded fintech space and how Machnet’s cross-border payment API is helping our current and prospective client’s to get there. 

What is Embedded Finance?

First of all embedded finance - what is this buzz and why do we care about it?

Wiki defines “Embedded Finance” as the integration of financial services and solutions within the products or services of a non-financial organization. Think of a messaging app like iMessage that lets you send money to your contacts as if you were sending text, an online store offering short-term loans in the form of BNPL (Buy Now Pay Later), or a creator platform with payment built into it. You get the point. Buzz or not, they are here to stay. 

According to Oracle’s estimates, the value of the embedded finance market is expected to exceed $7 trillion in the next 10 years, making it worth double the combined value of the world’s top 30 banks today.

Why is this important?

The great convergence. We have seen this play out multiple times in the recent tech evolution. All the core services and payments are conversing into a single application and it's implausible that most users even notice those are independent services. All the applications and services that need payment are now built into the same application. 

Gone are the days when you pay a fee, get the code and enable a service via a different service provider portal. Ideally, people want everything to be in a single place and reached from your mobile app in just a couple of clicks. It makes for an awesome customer experience and directly impacts businesses' top line by significantly reducing friction on closing a sale. 

Just take an example of BNPL. You go to the Peloton website to buy a new bike. At the checkout, if you want to take advantage of the BNPL feature, all you need to do is fill in a few fields, provide your details, and boom, the lending is instantly secured and you can close the purchase. 

The traditional route, if you decide to go for the loan option, would have been to go to a physical bank, provide lots of paperwork, get approved, take a check, deposit to your bank and pay for your Peloton bike from there. It is reducing days to seconds. 

Here are some of the use cases we are seeing from our customers:

Embedded payments 

Eg paying for your ride or buying online. Payments are natively built into the application. Take the example of Apple Card. You can apply for a card, get it approved, and pay for the grocery all while you are in the checkout line.

Embedded lending

More and more retailers are embracing this approach of providing access to deferred payment at the point of sale without any friction. 

Embedded insurance

 Insurance products can be found and added to purchase at the point of need with just one click, making contact with a broker, insurance agent, or any intermediary almost redundant. A typical example of embedded insurance can be found while traveling. You’re offered travel insurance at the time of purchase of a flight or a hotel room all in the same application.

Embedded payroll

We are seeing more and more marketplace platforms adding payments to their solution. Let your users manage your freelancers, their projects, and payroll all in one single application by bundling the services. You don’t have to send the money through wise/Payoneer or other third-party payment services. All of that is embedded in your core application. 

Embedded creator platform

 Build a platform where your creators are earning as their audience is consuming the content with all payment services taken care of in the same application. Gumroad is a great example of this where creators are creating, publishing and getting paid in a single application. 

At Machnet we are re-imagining how we can help our customers build core or value-added cross-border payments services for their users. We are striving to provide the best-in-class compliant and always-on solution so our customers can focus on what they do best and leave the hassle of the payments infrastructure side to us. 

For companies, the benefit is very obvious and twofold. One is to massively improve customer experience by making it so simple and easy to close the loop without the need of getting out of the application. The other is even more critical: increasing the LTV (lifetime value) of a customer. Businesses want loyal customers who are happy to stick with the solutions for a long long time.

Businesses that are playing a long game are proactively looking into embedded fintech and associated services on how they can continue to amaze customers and continue to exceed their expectations. We see a lot of traction and a lot of future in this space so we focus our effort on helping our customers meet them where they need us. 

If you’re looking to launch an embedded cross-border feature and would like to understand how Machnet can help you tap into the cross-border payment opportunities, contact us to learn more.

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