How businesses can leverage embedded finance to streamline access to financial services

In an increasingly demanding world, keeping up with the growing number of payment options can be difficult, especially for small retailers – can embedded finance be the answer?

Businesses of all sizes have a lot on their plates. Inflation is spiralling, finding staff is difficult and the economy is looking more uncertain than ever. Meanwhile, the spread of digital technology has brought unprecedented choice to consumers, but it also creates an enormous headache for retailers, especially when it comes to payments. For some, the work involved managing multiple payment providers could be the proverbial straw which breaks the camel’s back. Fortunately, there’s a solution in the form of embedded finance.

What is embedded finance?

Embedded finance is the process of integrating all financial services in one place rather than dealing with traditional entities. It offers a secure, simple and efficient way to bundle all the services a retailer might use into one, easy to manage model. Financial solutions can be integrated into a business’ infrastructure, streamlining access to financial services such as lending, insurance or payment processing without redirecting people to third party destinations. It means fewer apps to deal with, fewer people handling money, fewer things to worry about and less time spent keeping up with financial logistics.

Interest in this sector has grown rapidly in the last few years. In 2020 the US embedded finance market reached $22.5bn and is expected to grow tenfold to $230bn in 2025.

Much of that growth will be coming in the payments sector where the burgeoning choice available to customers puts pressure on retailers.

Dealing with multiple financial partners, each with different payment and administrative requirements, is a growing headache for retailers. The problem is even more severe for relatively small or growing companies.

Customer expectations have grown. They demand levels of convenience and choice which would have been unimaginable even a few years ago, including payments and financial services. Digital technology has expanded the number of payment options available to them and they expect to enjoy these benefits wherever they go. What customers don’t see is all the work and effort which goes into making these services available.

Embedded payments can make life easier for all parties like embedding payments at the touch of a button. Rather than entering credit card details for all their transactions, customers can pay automatically through an app at the end of their buying journey. Digital wallets, meanwhile, can enable contactless mobile transactions.

In addition to this, other forms of financial services can be embedded into non-financial products, such as lending. Rather than the customer having to spend time comparing different providers, a lending option can be accessed at the point of sale without having to go direct to any bank or lender.

In much of the same way, insurance can be added onto the purchase at a point of need with just one click removing the need to contact a provider or broker. For example, it can be used when booking a trip or buying electronic goods, with optional insurances added on in the purchase.

Related: Embedded Finance – fusing retail and financial services into one cohesive customer journey

Looking down the road, this sector has enormous promise. It’s flexible, versatile and can be applied to just about any company or industry – all of which explains why the projections for growth seem so positive. Even so, adopting it does come with a number of challenges.

Making it work

Existing technological systems are not set up to manage these real time functionalities which embedded finance products need. Although it is possible to upgrade IT, this comes with a lot of work and expense. It’s a cost which may be beyond the scope of most small and medium sized enterprises. However, there are specialist companies which can provide embedded finance features in a way which is easier to achieve and a whole lot more affordable. As it so happens, NCR is one of them.

In March, NCR acquired fintech intellectual property for open banking from Spoke Technologies Limited. The purchase accelerated our move into open and international digital banking and added data integration capabilities which would support the integration of finance and retail services for our clients.

As Andrew Tarver, the founder of Spoke Technologies at the time said:
“With this acquisition, NCR has the software to embed financial services capabilities into every customer experience and build market-leading data intelligence for their clients.”

It adds to existing services across retail, hospitality, banking, telecom and communications and digital banking and allows us to embed financial services into every part of our service from ecommerce to point of sale and much more.

From our customers’ perspective, that means fewer apps to deal with, fewer people handling their money and less time spent keeping up with financial logistics. It hands off much of the complexity, which digital payments services can bring to this landscape, into a package which is much more streamlined and simpler to understand.

What to look for

Finding a partner that can handle end-to-end capability, this is what will take you from a complicated environment in which you’re balancing multiple demands to a more streamlined and balanced world. A partner that handles all your payment and processing services with the benefits of digital technology without the complexity is crucial.

The perfect union would be a partner who not only understands cutting-edge technology solutions but also the sector you work in, and has an ideal position to understand the challenges companies face in your industry. They should be able to design tailored-made solutions which solve your specific issues, that come with high quality technology, in-depth experience and outstanding service.