Embedded finance — what it is and how it can be used

Embedded finance is revolutionizing the world of finance, affecting everything from how companies pay to how they access finance. But what exactly is it and how can it benefit both suppliers and end customers in business finance?

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What is embedded finance?
Embedded finance involves the integration of financial services into non-financial platforms, applications and services. It enables non-financial companies to offer financing solutions to their clients, within the scope of their own operations. In this way, customer needs can be met directly when it arises, rather than having to turn to a separate actor to solve it. Something that provides a more seamless experience where financing becomes a natural part of the business process.
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Applications of embedded finance
Integrating financial services is not really a new phenomenon — chain stores and gas companies have been offering their own debit and credit cards for a long time. However, as the development of fintech has gained momentum in the last decade, embedded finance has become even more relevant, as the potential uses have become even more numerous.
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Embedded banking
Embedded banking, or banking-as-a-service is used synonymously with embedded finance as embedded finance services usually fall under banking as an umbrella term. For example, it could be an accounting service that integrates accounts and cards to offer a complete solution where banking and accounting are automated in one place.
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Embedded lending
Similar to embedded banking, embedded lending is an opportunity for companies to integrate services traditionally provided by banks into their offering. However, when embedded banking means offering broader banking services, embedded lending is about integrating financing solutions. It may be that payment service providers use embedded lending to offer their customers integrated lending solutions. Or a neobank that doesn't have the infrastructure to handle lending itself, but integrates it to have it in its offering. Access to finance has long been an issue for businesses, especially SMEs. Embedded lending addresses this and provides the opportunity for more tailored financing solutions via providers with whom the companies already have a business relationship.
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Embedded funding
Unlike embedded banking and embedded lending, embedded funding is not the ready-made solutions that are integrated and offered by non-financial corporations, but the financial infrastructure and capital that is used to build financing solutions. The field of application of embedded funding is companies that offer niche financing solutions or buy-now-pay-later. Traditionally, such companies have had to borrow money themselves and then borrow the money further. Something that entails relatively high financing costs and is associated with a certain amount of risk. With the help of embedded funding, they can instead integrate the capital part of the business itself.
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Benefits of embedded finance
The benefits of embedded finance are many. For suppliers, it provides opportunities for streamlining and comparative advantages where different companies can leverage each other's expertise to deliver a better experience and product. For SMEs, this means that financing is both more accessible and tailored to their needs.

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Benefits for suppliers
Embedded finance opens many doors for business service providers. It provides the opportunity to integrate products and services they themselves do not have the skills, infrastructure or advice to build. By doing so, they can create a more complete and attractive offer out to the customer, which can lead to increased loyalty and longer customer relationships. When customers have all their financial needs met by a single provider, the experience becomes more seamless and the risk of customers turning to competitors is reduced. All in all, embedded finance empowers companies to find new revenue streams, while improving customer experience and increasing loyalty.
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Benefits for SMEs
Financing has long been a major problem for SMEs. Embedded finance has the potential to provide significant improvements in access to finance while also resulting in financing products that are more tailored to business needs. It will make life as an entrepreneur more convenient when financing becomes more available in general, and available from actors who do not have financing as their main business in particular.
Embedded finance can result in significant changes in how financial services are delivered and consumed. By integrating financial services into their offering, companies can not only improve their own business, but also offer their business customers an enhanced experience. For companies in banking, finance, payments, ERP and other business services, embedded finance therefore offers a huge opportunity.

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Want to learn more about how embedded finance can revolutionize your business? Contact us and we'll tell you more.
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