Embedded finance - The (r)evolution of payments

Uncover how embedded finance is transforming financial services, helping companies reposition their brands and create new customer experiences.

How is embedded finance driving this payment revolution? 

Embedded finance has emerged as a powerful disruptor, influencing industries across the globe. This shift is causing many sectors to rethink how they deliver a seamless customer experience. With new players entering the scene, this modernized form of banking is revolutionizing interactions in unique and exciting ways. 

Experts predict that embedded finance will be valued at over $7 trillion within the next decade, outpacing the combined worth of the world's top 30 banks by more than double. [1] 

Within embedded finance, there are three key areas that have seen substantial development: embedded payments, embedded lending, and embedded insurance. 

Embedded Payments

Embedded payment systems integrate seamlessly into the infrastructure of apps or e-commerce sites. These systems provide a smooth, frictionless experience for users. For example, services like Apple Pay allow customers to make purchases without repeatedly entering their payment details. 

In today’s digital world, customers expect a variety of payment options. We’re seeing more examples of embedded lending as well, such as in shopping carts, app stores, digital wallets, and accounting software. These solutions are simplifying financial transactions by eliminating much of the complexity traditionally associated with them. Consumers can borrow money directly from the platform they are using—without having to deal with a financial institution. Companies like Klarna and ClearPay are leading players in this space.

Embedded Insurance

Insurance offerings are now commonly integrated into transactions, often with just a click. This convenience removes the need to search through multiple insurers. A prime example is travel insurance, which can be added when purchasing airline or train tickets. 

The embedded lending market, valued at $5.5 billion in 2021, is projected to grow to $32.5 billion by 2032, representing a compound annual growth rate of 19.4% [2]. 

Customer Experience Optimization 

One of the major challenges faced by embedded finance providers is optimizing the customer experience. Companies aim to create a smooth, "frictionless" user journey to reduce the risk of customers abandoning transactions. For instance, when you shop online, you expect to see multiple payment options, and the checkout process should be quick and effortless—your card details are pre-filled, or you can simply choose to pay later with a single click. 

MoneyLive reports that 60% of customers expect to switch channels during the application process without needing to start over. This makes integrating channels correctly essential for reducing abandonment rates. [3] 

Abandonment rates serve as an important metric, revealing the level of friction customers encounter. The higher the friction, the higher the abandonment rate.