The embedded finance model is closely associated with e-commerce companies and also, increasingly, with large tech firms. For years, both types of companies have sought effective ways to integrate a wide variety of financial products and services into their ecosystems. Embedded finance opens up monetization opportunities for these nonfinancial firms by allowing them to earn a share of financial transaction fees, charge for premium financial services, and cross-sell complementary products, all while fostering long-term loyalty as customers become more deeply integrated into the company’s ecosystem.
By offering financial services within their existing ecosystems, companies can provide a more convenient experience, reducing customers’ need to navigate multiple platforms and increasing their engagement with the primary platform or product. In the developing world and emerging markets, embedded finance can even lead to the expansion of banks’ customer base and the development of entirely new business models, as unbanked individuals’ first interaction with banking services may be through an experience that’s embedded in smartphone applications.
“The rise of nonbanking platforms has created a new reality for the banking and capital markets industry, where customers are increasingly looking for seamless, personalized experiences,” says Charles Richards, a senior manager with PwC UK. “Nonfinancial platforms serve as the primary touchpoints for customers, while banks provide the infrastructure and regulatory approvals.”
