1 March, 2023

6 minutes of reading

Written by: Alice Casagrande

Embedded Finance: The Future of Integrated Finance


Embedded Finance, a concept still relatively unknown, has already taken root in Europe and globally, set to revolutionize financial services. Let's delve into what it entails, how it can be integrated and the various opportunities it presents for companies and customers.

What is Meant by Embedded Finance?

Embedded Finance or incorporated finance refers to the integration of one or more financial products within a non-financial company's offering. 

This means that virtually any company can offer services previously exclusive to banks and financial institutions. This shift has been enabled through collaborations with fintechs, like us at Opyn, which today stand as a complementary and integrative solution to financial institutions.

Fintechs, using their innovative technologies, allow businesses across all sectors to seamlessly incorporate financial services into their operations for the end user. The possibilities are vast: credit solutions, insurance, and investments are all additional services enabling companies to generate new revenue streams, retain customers and attract new ones through an enhanced user experience.

Embedded finance notably capitalizes on the continuous growth of both B2C and B2B e-commerce, enabling online businesses to offer banking services (such as payment methods) directly on their websites without redirecting customers to a banking institution. This mechanism is facilitated by the so-called "banking-as-a-service," leveraging API integrations to embed financial services into the user experience of non-financial companies. 

In this way, integrated finance allows businesses to meet customers' needs contextually, at the right moment in the purchasing experience.

Examples and Applications of Embedded Finance

After introducing the concept of Embedded Finance, let's delve into its practical integration within businesses.

Embedded Payments

Integrated digital payments that can be incorporated within e-commerce without relying on a payment institution. Today, customers can make online payments directly on the seller's site with countless options: credit cards, reward points, bank transfers, PayPal, cryptocurrencies, and more. Users can save these payment methods for future use, facilitating purchases with one simple click, making the payment experience truly frictionless.

Embedded Lending

Why endure lengthy waits for a loan when embedded lending exists? 

With Buy Now Pay Later, buyers can request and secure an advance right at the point of purchase. Consider our service Opyn Pay Later, which allows sellers to offer installment and deferred payments with maximum flexibility to their B2B clients for both digital (remote and e-commerce) and in-store purchases via payment link. For merchants, it's as simple as entering the amount and customer's VAT number, then sending a secure payment request.

It's an efficient method to boost sales; indeed, 50% of buyers would spend more if given the option to delay payments. It's unsurprising that, according to Future Market Insights, this market will hit $32.5 billion by 2032.

Embedded Insurance

Gone are the days when identifying and acquiring the best insurance package was a lengthy, tedious process. Through embedded insurance, buyers can add insurance at the time of purchase, eliminating the need to communicate with a broker or insurance agent. In this way, for example, one could buy a smartphone along with coverage for theft or damage.

Embedded Banking

Embedded banking allows non-financial companies to offer their customers a branded IBAN or virtual account, enabling them to hold funds and make payments. 

A perfect example is Shopify Balance, an account provided by Shopify that allows companies selling on the platform to bypass the bank, managing payments and transactions for their store from one centralized location while also accessing cashback and receiving offers from partners.

Why Integrate Finance into Your Business?

The trend is evident: on one hand, consumers are demanding increasingly straightforward and immediate services, and on the other, companies are seeking to boost sales and open new revenue streams smartly and cost-efficiently. 

The solution lies in embedded finance, allowing every type of company to:

  • Increase profits related to their core business through a more comprehensive offering, including on the financial side.
  • Retain customers by offering a frictionless, hassle-free purchasing experience.
  • Gain new insights on user behavior through better monitoring of purchase choices and transactions.

The Future of Embedded Finance

The applications of embedded finance are manifold. Thanks to ongoing technological evolution, AI development, and the use of Big Data, Embedded Finance is already one of the most significant trends in the financial sector.

In 2020, this market was valued at approximately $22.5 billion. According to Lightyear Capital estimates, it will exponentially grow, reaching €230 billion by 2025, corresponding to an average annual growth of nearly 60%.

One thing is certain: customers' demand for more of these services will increase, and concurrently, more and more companies will seize the myriad opportunities this new financial approach presents.Are you ready to integrate finance into your business?

If you're a B2B company, you can start with Opyn Pay Later. Discover all the advantages of Buy Now Pay Later and begin offering flexible payments to your business customers.