How Does Embedded Financing Create New Revenue Streams?
Emerging technology and regulatory policies have facilitated the growth of financial services in India. Over the past few years, India has witnessed massive growth in digital transactions. As a result, businesses are increasingly adopting innovative financial technologies to offer better experiences for their customers.
Embedded financing is an excellent example of digitalisation in the fintech sector and refers to the seamless integration of financial services into other services. KredX Pay Later is an ideal solution for businesses which are looking to integrate embedded financing.
What Is Embedded Finance?
Embedded finance refers to the seamless integration of financial services into non-financial services. In other words, it embeds financial services and tools within the services or products that a non-financial organisation offers. An example would be an e-commerce store integrating digital wallets to offer customers the benefit of contactless payments.
A study found that every Indian spent a cumulative total of 7.6 billion hours on shopping apps in 2021 (1), which encouraged businesses to develop their online presence rapidly. The primary purpose of embedded finance is to streamline financial processes for B2B and B2C businesses. It facilitates ease of payments at different economic touchpoints.
How Does Embedded Finance Create Revenue Streams?
Research and Markets have reported that embedded financing would rise by 46% in India and reach USD 4,801.8 million in 2022 (2). The main reason why so many businesses are adopting embedded finance is that it increases revenue streams. The following list covers where it can be integrated:
The embedding of digital wallets provides value and greater convenience to customers. It also ensures customised services. For example, it allows them to deduct or add credits through the respective merchants only.
Embedded finance companies provide the opportunity for businesses to offer insurance policies. It is more convenient for customers to purchase insurance directly from the service provider at the point of purchase instead of buying them separately.
Buy Now, Pay Later (BNPL)
The B2B BNPL facility allows business customers to take out loans to cover their purchases. As a result, it improves their productivity and increases the revenue stream for suppliers and merchants. KredX is a platform offering a closed-loop financing solution for B2B companies through its Pay Later service.
Some businesses focus on integrating embedding payments such as payment installation, secured cards, and co-branded payment cards. For example, car manufacturers are integrating payments that enable people to pay for fuel without leaving their cars.
Key Benefits of Embedded Finance
Listed below are the key benefits of embedded financing:
First, it is an alternative revenue source for businesses because they receive a share of the revenues received from customers.
BNPL and EMI options provide customers with the requisite financial cushioning for high-end purchases.
Embedded finance enables companies to acquire customers easily.
Embedded financing is an emerging sector in fintech and holds massive potential for growth in India. Seamless integration of financial services into non-financial businesses facilitates better customer experience. For businesses, it generates more revenue streams and helps in customer acquisition.
Frequently Asked Questions
What is an embedded finance API?
The interface that facilitates communication between businesses and embedded service providers is embedded finance API. It helps businesses access financial services easily, thus helping in their growth.
What role does embedded finance play in the healthcare industry?
The healthcare sector can use embedded finance to issue cards and digital wallets to medical professionals. While they benefit from cashless services, the businesses develop a revenue stream from an exchange of fees.