The business world has been obsessed with discussing the good, bad, and ugly of cryptocurrency for years. The ups and downs of recent months have kept investors and pontificators in a frenzy. But while we’re fixating on crypto, many overlook the technology that stands to transform how consumers and businesses bank, lend, buy, and borrow: embedded finance. Those who understand its potential realize that it will have a farther-reaching, longer-lasting impact on how currency is exchanged. Oracle estimates the value of embedded finance will reach $7 trillion within 10 years, which is double the value of the world's top 30 banks combined.
The opportunity for those embracing embedded finance is enormous, particularly in B2B e-commerce and the nonprofit sector serving the financially disadvantaged or those shut out of traditional financial institutions and tools. Think of trade credit insurance and buy now, pay later (BNPL). Consumers are embracing these new tools and using tools such as them across the web.
How embedded finance is shaking up for and not-for-profit businesses
Embedded finance reduces barriers to entry by simplifying the financial processes for consumers and businesses. Before the internet, consumers were required to seek out a brick-and-mortar bank for their financial needs, including loans and credit lines. These services are now easily accessible at the point of sale in various apps and websites.
Examples of embedded finance already at work are:
- Embedded payments: Instead of entering a credit card or bank account number, embedded payments allow users to pay with one click. Think Starbucks, Uber, and GooglePay.
- Embedded banking: Moving away from traditional banking, embedded banking allows users to bank where they are getting paid. For example, Lyft drivers can get paid on their Lyft debit card as they go instead of waiting for a paycheck.
- Embedded Insurance: Eliminating the insurance company, businesses are offering insurance as part of purchasing a product. Amazon has long done this with appliances, and now Mercedes, Porsche, and Tesla all offer insurance directly to their customers.
- Embedded lending: Businesses are partnering with companies such as Affirm, Klarna, and Afterpay to allow users to turn a purchase into a series of payments that are automatically deducted from their account.
- Embedded investments: Apps such as Acorn allow users to put money into their investments by rounding up - they don’t have to think about it; the change is automatically deposited.
Sectors that will be impacted first:
In addition to Banking, Financial Services, and Insurance (BFSI), other sectors are already using embedded finance heavily. Those environments where consumers are already buying, selling, and managing their finances have embraced embedded fintech. Other verticals that are using embedded finance include:
Real Estate: In 2019, Zillow launched its Home Loans and, later, its own closing services, allowing buyers to execute their entire home purchase within the Zillow system.
Non-profits: Charity organizations can maximize donations by integrating embedded finance - customers are more likely to purchase and return to an item or service if it is easy to use. Millennials and Gen Z, who are more socially conscious, will also be more willing to give if the tool is embedded.
Membership organizations: Unions, clubs, and any membership organization can use embedded finance to offer their members additional benefits, which helps membership retention.
Health Tech: In the U.S., payment inefficiencies cost 35% of the $5 trillion annual healthcare expenditure. Embedded payment solutions can help fix the problem.
Why Productfy is the game changer for non-fintech businesses:
In the wake of the pandemic, consumers and businesses are demanding digital alternatives to brick-and-mortar banks. Fintech companies and enterprises have the knowledge and means to create their own embedded finance tools, but for smaller businesses, nonprofits, and startups, there has been a technology barrier until now.
To democratize access to financial products, Productfy has created the first distributed financial infrastructure that enables any organization to launch a financial product and to do it at a rapid speed. The product will help underbanked communities globally, especially Black and Hispanic populations in North America. The startup will achieve this with:
- A powerful, streamlined process to not allow non-tech users to build their own embedded app
- Embeddable modules for payments, deposits, and card issuance
- A progressive approach to quickly and efficiently qualify, onboard, and launch a FinTech program to market in as little as three weeks.
Productfy is on a mission to help reduce the tremendous wealth gap and allow the most vulnerable the opportunity to thrive. If you are interested in learning how Productfy can help your organization develop and launch your own embedded finance products, let’s set up a time to talk.
