Merchant Benefits of Embedded Finance


“Finance is not a mathematical puzzle,” wrote economist John Kay in his post-financial crisis book Other People’s Money. Instead, Kay reminds us that “finance exists to serve households and businesses.”

This point may sound obvious or corny, but it’s a good one for the financial services sector to remind themselves of. Embedded finance, and what it represents in terms of fintech and real economy partnerships, has advantages for some groups, especially merchants. Let’s talk about how we define embedded finance, why it’s on the rise, and how merchants can benefit from the value it creates against the backdrop of difficult economic times.

What is Embedded Finance?

Embedded finance basically refers to the integration of financial services and products with non-financial products and services, such as mobile apps, social media platforms and e-commerce websites. It enables companies in the non-financial sector to offer financial services to their customers without having to build financial infrastructure from scratch.

For consumers, it should provide faster and simpler payment methods without compromising security, new revenue streams and customer engagement opportunities for these businesses, while making financial services more accessible to customers. is.

Why is Embedded Finance on the Rise?

The embedded finance sector is expected to be worth US$7.2 trillion globally by 2030, reaching US$121 billion by 2029 in the UK and Europe, an increase of 187% from 2022. , is increasingly paying attention to trusted brands. Areas such as online travel, marketplaces, and digital banking use payments to stay at the center of their customers’ financial lives.

What are the benefits of embedded finance for merchants?

Let’s take a look at two benefits that will help your business thrive in the face of today’s market adversity.

1. Cut costs and open up new revenue streams

Embedded finance allows businesses to avoid the cost and complexity of building and maintaining their own financial infrastructure. It will also enable merchants to capture new revenue streams that traditional financial institutions would otherwise have used as a cost of doing business. Merchants can also increase customer engagement by offering financial services such as payments, loans and insurance directly from their website or app and generate additional revenue streams through this channel.

2. Take back control of cash management

70% of payments and finance leaders report that their payments, finance, and payments functions are fragmented due to fragmented technology and transactional data. By integrating payment processing and funding into their products, services, and back-end operations, businesses gain a new level of visibility and control over cash flow while reducing the time and costs associated with traditional payment processing. can be obtained. This is critical during times of economic uncertainty, as supply chain disruptions and rising interest rates make managing cash flow more difficult and even more important.

Enable Embedded Finance with Cards

Card issuance is one example of how merchants can provide a seamless shopping experience. Let’s take a closer look at the payment card issuing program.

Physical, virtual or hybrid payment cards issued by companies in partnership with issuing providers are replacing traditional corporate cards and legacy expense software.

Embedded cards reduce transaction costs by lowering interchange fee costs for businesses and enable merchants to proactively reduce interchange fees on every transaction.

Partnering with a card issuing service that offers payment capture services also helps merchants Take back control of cash management, It removes the need for cumbersome pre-funding by allowing the funds earned to flow directly to the issued card in real-time.

moreover, Embedded cards create a one-stop issuing shop for merchants. Launching a card program with an issuing provider means that issuing, processing, administration, compliance and reporting functions can all be integrated in a single API, enabling merchants to achieve faster and optimized performance. To do.

Strengthen earnings for the future

For today’s impatient consumer, non-financial companies should consider streamlining the customer journey with a one-stop embedded financial solution. By embedding financial services into an accessible platform that is easily accessible to individuals, SMEs and micro-entrepreneurs, merchants offer a viable and friendly alternative to traditional banking systems and reach a wider customer base. and develop revenue streams.

In today’s challenging economic climate, businesses need to generate revenue for the real economy, and embedded finance does just that.

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