The market size of the new fintech trend embedded finance has grown rapidly in recent years, despite it being such a young concept. The widespread adoption has disrupted the role of traditional banks, and many non-financial businesses are
within a short future. The worldwide value of venture capital
reached almost 4.2 billion U.S. dollars as of September 2021, which is more than double the investment value during the whole previous year.
What is embedded finance?
Embedded finance is a fintech subsector and the term became trendy only in the last two years, as it boomed particularly in 2020. It refers to financial services or products offered by non-financial providers, such as the company itself or by a third party. A few examples of where it is used are in online payments, consumer lending, insurance, or wealth management, where the largest usage of embedded finance today is for payments, such as making it possible for e-commerce companies to perform payments on their sites without entering bank details. A common example of that is
“buy now, pay later” (BNPL) when shopping online, offered by companies such as
Klarna, Afterpay, and Affirm.
The future of embedded finance
The
embedded finance market is expected to grow heavily, especially for payments where the market value in the United States is expected to experience a nearly ninefold increase by 2025 compared to the value in 2020. The
most offered embedded finance service among European non-financial companies as of 2021 was embedded banking. Many European firms also plan to offer embedded banking and embedded payments within the next five years. It is no surprise that the market is expected to grow: For customers, the use of embedded finance means ease of use of services, and for companies it has
several appealing factors, including delivering a better customer experience, increasing the number of customers touch points with their brand, and increased cross-selling opportunities.
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