Monday, July 15, 2024

Why is embedded finance relevant today?

Why is embedded finance relevant today?:- Effectively implemented, embedded finance can create a better financial ecosystem, where more people can use meaningful financial products and services, which are more convenient and affordable than ever before. Essentially, the whole concept of embedded finance involves the financial services of companies with a financial background that are sold through cross-industry convergence.

Big technology companies, retailers, and mobility providers are all part of it. The economic argument can be found here; Adding financial services to a company’s core business strengthens its base – and enables it to enter new markets.

In addition, the provision of financial services requires a license. So embedded finance is made possible by “banking as a service” providers. Business partners cooperate with licensed banks.

The importance of embedded finance for businesses

With the growth of embedded finance over the last few years, no business should stop because it literally means passing on its customers to its competitors. Here’s why:

Reshaping the value chain of businesses:

The COVID-19 epidemic has shown that businesses can effectively communicate and manage in new ways. After adapting to amazing speed and scale, many companies have been forced to adapt in unprecedented ways. In particular, businesses will rethink their value chain and seek to consolidate operations, create new sources of revenue and reduce costs. In addition, embedded finance simplifies and speeds up the complex B2B payment process, thus increasing the company’s productivity.

Disruption in payroll:

Embedded finance creates a ripple effect in processes from the beginning. Companies will use this technology to automate payroll services. With this, they will be able to pay salaries on demand. In addition, an advance or direct deposit can be made in the salary, which allows the account holders to receive their salary ahead of time. As a result, businesses can lend to their employees and generate more revenue.

Changes in Behavior in People:

Epidemics have forced people to rethink their purchasing behavior. As a result, demand for online and digital services changed in 2020. After becoming the norm for most people, this change will continue into 2022 and beyond. Perhaps the most notable trend is the transition from physical to digital. In fact, studies have shown that embedded finance helps businesses reach new and existing customers online.

How does embedded finance fit into today’s economy?

Banking has evolved a lot over the years. Through open banking, financial services are becoming more evenly distributed and free, allowing them to be integrated into a wider ecosystem. Using banking-a-service, this opportunity can be translated into solid, customer-centric applications.

Meanwhile, a customer-centric approach is needed to stay with digitally savvy customers. Compared to many long-established banks, Neobank offers favorable conditions to entice customers to switch or open a second or third account. In addition, providers plan to use platform effects by integrating user-focused partner networks: using these networks, Neobanks can increase loyalty to its customers.


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