Enhanced Consumer Experiences through Embedded Banking and Insurance.
Industries focused on consumers are actively striving to enhance their customer experiences. A pivotal aspect of achieving this lies in revolutionizing financial transactions. Financial service entities, including banks and insurers, are crafting solutions to leverage this distinctive opportunity, generating fresh revenue streams and expanding their customer base. Embedded finance entails the fusion of financial services into the offerings of other industry players, seamlessly delivered when customers require them.
The realm of consumer products and services, embedded finance fosters seamless customer journeys across various scenarios, encompassing three pivotal product categories:
Embedded Payments involve the integration of digital payment options into the platforms and applications of non-financial enterprises. This integration facilitates the payment for products and services without necessitating the departure from a company's website or app. Illustrative examples encompass digital wallets and in-app card payments.
Embedded Lending pertains to the amalgamation of credit facilities within the sales channel. A notable instance is the emergence of "Buy Now Pay Later" (BNPL), enabling consumers to make immediate purchases with deferred payment schedules. The effortless incorporation of consumer credit history permits the instant provision of such loans during the purchase. Furthermore, non-financial organizations increasingly combine co-branded credit cards with loyalty incentives and additional customer service alternatives.
Embedded Insurance involves the bundling of insurance products with other financial or non-financial offerings. These embedded insurance products can be directly or indirectly connected to items procured at the point of sale. This approach often targets safeguarding high-value items like electronics, consumer appliances, jewellery, and more. Moreover, travel-related services like ride-hailing and air travel are progressively intertwined with travel insurance.
Embedded Finance in Consumer-Centric Industries
Diverse consumer-focused sectors present an array of touchpoints for customers. Embedded finance plays a pivotal role in delivering seamless experiences across these points of interaction, uniting financial and non-financial services. Consider a scenario where an individual purchases a mobile device through a retail store or e-commerce application. This transaction necessitates payment, and the buyer might seek options for discounts, credit, and insurance coverage. Similarly, individuals seeking healthcare services require in-app payment options for diagnostics and doctor appointments, coupled with integrated health insurance. Embedded finance amalgamates financial service providers with non-financial entities, generating customer-centric experiences that bring value to all participants in the ecosystem.
Impact of Embedded Finance on Consumer-Centric Industries
Industries geared toward consumers experience profound transformation through embedded finance, as depicted in the following industry-focused segments:
Retail: Embedded finance empowers retailers to offer personalized experiences to customers while leveraging core financial infrastructure such as payments, lending, savings, and insurance. Co-branded credit cards, for instance, can drive additional shopping trips and spending. Even for minor purchases, retailers provide the option to pay in instalments via BNPL. Automotive retailers utilize embedded finance, offering their financing options integrated into digital channels. Retailers can gain new revenue streams through lending fees and commissions, with embedded finance facilitating greater personalization.
Healthcare: Integrated into healthcare platforms, embedded finance simplifies payment processes and streamlines insurance claims, leading to a more seamless patient experience. Patients can pay online, reducing the need for cash transactions at banks or ATMs. Hospital processes can also be optimized by embedding purpose-built financial products into software applications, integrating previously siloes data for smoother transactions.
Mobility: Embedded finance offers enriched experiences in mobility and travel, encompassing embedded payments, discounts, loans, and insurance. Smartphones enable in-app payments for various modes of transport, even enabling in-journey commerce for long-distance travel. Shared mobility services can provide drivers with loan options for vehicle purchasing and maintenance. Carbon discounts for sustainable travel choices further promote eco-friendly consumer behavior.
Media, Telecom, and Technology: These industries pioneer the subscription service model, with embedded finance expanding in-app subscription payments. Additional services like on-demand rentals and seamless event experiences are emerging opportunities for embedded financial services.
Utilities: Embedded payments provide seamless in-app bill payment experiences for utilities like electricity, water, or gas supply. Innovative utilities explore subscriptions and convenient payments for maintenance services.
Conclusion
Embedded finance is evolving alongside the convergence of industries, offering significant revenue prospects for financial service providers and insurers to integrate their services into non-financial experiences. As cross-industry ecosystems emerge, efficiency and value increase for stakeholders. Embedded finance's influence will continue to expand as industries reshape around customer experiences, presenting ample innovation prospects for both financial and non-financial institutions.
