Traditional banking houses no longer hold the monopoly on offering financial services. Instead, companies whose core business initially laid outside the financial sphere have adopted what’s called Embedded Finance. This means that they offer financial services as add-ons and parts of the regular user journey on their platforms.
Originally, financial services were embedded in online shopping or service platforms. Yet companies in other application areas adopt this practice, too. Thus, nowadays we arrive at a big list of different finance-embedding enterprises including:
- Online marketplaces
- Comparison portals
- BigTech companies
- Logistic and transportation firms
- Car manufacturers
- Social media giants
- And many more…
What all these diverse companies have in common is their aptitude for digitization. They already deliver on the tech front, mostly; the fin just has to follow. And even as most such companies only started to develop their financial service (or finserv) portfolio, they have vital advantages over competitors:
- A widely known branding that many customers are familiar with from their everyday purchases.
- A streamlined user journey, into which the financial services can be embedded easily.
- An affinity towards innovation and digital transformation – many of them have already shaken up their own areas of operation and are well known for it.
This mixture allows those new finserv players to quickly scale and activate a broad customer base when compared to cold-starting fintech companies.
But what is Embedded Finance exactly? And should banks or fintech companies care?
Examination underway…Read More