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Why Embedded Finance Is The Next Evolution In Blockchain?

Whenever you book a taxi via a ridesharing app, place a food order via your smartphone, or complete a payment from your mobile device — you are interacting with embedded finance technologies.

With an increase in online trade, more and more companies are turning to embedded finance for delivering a seamless shopping experience. The integration of savings, insurance, credit, and investing tools with non-financial apps and websites has enabled embedded finance applications to grow fivefold, from US$54.3 billion in 2022 to US$248.4 billion by 2032.

If you run an online business or an eCommerce store, now is the time to embrace embedded finance offerings to deliver immersive shopping experiences across every touchpoint. In this blog, we will understand what embedded finance is, its benefits, and how you can leverage it along with Blockchain. If that sounds exciting, let’s get going!

What is embedded finance?

Embedded finance is the bridge between consumers who want services faster and easier — and companies that want to receive payments quicker. It’s the technology that binds financial services like lending, payment processing, or insurance into a company’s technical infrastructure. This allows users to avail all these services without having to leave the company’s website.

For instance, when a customer buys anything from your website, they can avail a loan for the purchase right from your website (through companies like Splitit) instead of going to the bank. This makes the whole process fast and frictionless. Here, you closed a sale, the customer got their product, and Splitit got a new user.

Examples of embedded finance applications

A few major financial segments where “embedded” became the new norm are payments, loans, insurance, and regular banking. Here are a few popular use cases of embedded finance.

» Embedded payments

On-site payments are one of the most popular use cases of embedded finance. We all have used websites and applications that allow users to complete the payment without leaving their platform.

Giant e-commerce companies like Amazon, Walmart, Best Buy, Home Depot, and many others are prime examples of embedded payments. They allow customers to complete their purchases and pay right from their application or platform. This makes online shopping seamless and hassle-free.

» Embedded lending: Buy Now, Pay Later (BNPL) installment plans

Before the emergence of embedded finance technology, consumers had to place a deposit on an item to reserve it for later when they came back with the full amount. It was popularly known as a “layaway” purchase agreement.

Later, banks started offering loans for different purposes. However, not everyone would be eligible for a loan, and borrowing money for small purchases can be expensive and infeasible — not to mention the hefty amount of paperwork required to complete the transaction.

Embedded lending changed it by allowing companies to offer “Buy Now, Pay Later” services where customers can get the product right away and pay for it later through monthly installments. Users can select the embedded installment plan at the checkout. For instance, companies like Affirm, Afterpay, and Klarna offer buy now, pay later options; users can select them at the checkout to convert their payment into small installments.

Embedded lending not only minimizes the wait time but also allows companies to offer flexible payment options. This way, they can not only boost conversions but also increase customer loyalty with embedded lending.

» Embedded insurance

Like payment and loans, embedded insurance allows users to get coverage for an upcoming trip or a new car purchase at the checkout. No need to contact any insurance agent or go to the insurance company’s website to complete your application.

For instance, users can directly opt for an insurance plan on their travel while booking their tickets via the travel app. Another example would be buying a smartphone online with full coverage for any damages caused to the device.

Benefits of embedded finance

Embedded finance has transformed eCommerce payments. It not only offers greater flexibility to customers but also helps businesses boost customer loyalty and revenues. Let’s look at a few benefits of embedded finance.

  • Enhanced customer experience: By integrating financial services into their platform, businesses can offer a seamless checkout experience, leading to increased customer satisfaction and loyalty.
  • Alternate revenue stream: Businesses can get a commission from financial service providers if a customer chooses their services. For example, if a customer buys a smartphone via the buy now, pay later plan offered by Afterpay — you will receive a commission for their purchase.
  • More conversions: Embedded payments will help you improve conversions and maximize revenue.
  • Higher order value: EMI and BNPL (Buy Now, Pay Later) allow customers to buy high-value products with minimal paperwork.
  • Competitive advantage: If you offer several financial services like insurance, easy financing (EMI), and flexible payment options — you will have an edge over your competitors who have neither of these options.

Embedded finance in Blockchain

Blockchain and embedded finance are two of the most disruptive technologies of the 21st century. Together, they can provide a robust technical infrastructure for the adoption and integration of embedded finance into decentralized platforms.

Embedded finance in Blockchain can open a lot of new possibilities for businesses and payment processing platforms. Companies can employ embedded finance in several decentralized services, from Dapps and staking pools to crypto exchange platforms and eCommerce websites.

Blockchain’s immutability, transparency, blazing-fast transaction processing speed, and lower fees, coupled with the flexibility and convenience brought by embedded finance services, will provide an exceptional user experience across DeFi apps and services.

Your journey to embedded finance starts here

If you are a business owner or develop decentralized platforms or applications, now is the time to integrate embedded finance solutions into your technical infrastructure. Being a leading Bitcoin payment processor, Speed offers ready-made payment solutions for enabling crypto payments on your website.

With our plug-and-play extensions and developer-friendly APIs, you can add Speed to your platform with minimal coding. What’s more, we offer bank-grade security, a 99.99% uptime guarantee, and the lowest transaction fees on the market. Get started today to experience lightning-fast Bitcoin payments with Speed.

Speed Team