Embedded Finance: Shapes and Examples (Part 2)

In the first of a series of articles, we discussed what embedded finance is, its importance, and the main players in this ecosystem of new opportunities.

In this article, we will discuss the many forms that integrated financial services take to make life easier.

Ecommerce is one of the best places for embedded finance to grow and thrive. Not too long ago, when your clients wanted to buy something online, they had to pull out their wallet and key in a bunch of card information before they could click "buy." 

Embedded finance makes it easier for shoppers to purchase things by letting them store a card and check out by pressing a button. 

On the other hand, customers may choose a payment method that only needs simple tap-on-phone double authentication through a dedicated app to complete the payment, which is an effortless, yet secure, user experience sought by many. 

In a face-to-face context, embedded finance isn't that much of a step forward. Uber, the ride-hailing service, however, is one of the best-known examples of an embedded payment. With their app, users don't have to give the driver cash or swipe or tap a card. After the ride is over, the payment is taken care of automatically behind the scenes, and the linked card of the customer is charged.

The clients' mobile application is a major enabler in this situation. Customer-facing mobile apps have lately started to transform into super apps or digital wallets that mix various services and incorporate a variety of payment methods and financing alternatives. 

At Software Group, we’ve been noticing this trend for a few years now with our digital wallet platform, which we implement for banks and enterprises to help them revolutionize client journeys, enabling integrated payment methods and coupling solutions with improved and intuitive money management flow

With a genuine mission of providing its customers with modern and advanced financial solutions, one of the biggest banks in the Kyrgyz Republic decided to go beyond the standard mobile wallet in order to suit the needs of a market with a large millennial population. 

To offer competitive products that will help improve the lives of ordinary people by filling existing gaps in day-to-day activities. This could only be achieved by building a Super App with an ambitious scope. 

Rather than enabling basic payment operations, the bank’s wallet became a gateway to an ecosystem of features and capabilities such as peer-to-peer payments, sending and receiving money abroad, touch/NFC payments, biometrics, online loan applications and disbursements, mobile commerce, the ability to transfer funds from the wallet to other bank accounts and cards in the country, and more. 

In the end, Software Group had done 320+ integrations to build a full payments ecosystem around the bank’s customer, covering customer needs in the areas of banking, travel, education, retail, utilities, telcos, entertainment, government, charity, rent - a full-scale Super App that stands out from the rest of the banking apps in the country.

Recently, a well-established logistics company in the Balkans joined forces with Software Group, rethinking their fundamental services to clients. 

Driven by their desire to offer more value B2B and B2C and to reduce the cost of cash end-to-end, the company launched a new digital wallet platform, combining 3 pillars: logistics, e-commerce, and financial services. 

The solution closes the logistics process and enables access to a service that is the first of its kind in the field of logistics in the country.

Using Software Group's mobile wallet solution, end customers of the logistics company are able to pay by scanning a QR code at the courier’s offices, pay via virtual POS, as well as make P2P payments and bank transfers securely and swiftly, all through a single mobile app. 

The company's solution integrates the full cycle of merchant-consumer-courier interactions and is developed to the highest standards and best practices, which enhances customer satisfaction and cuts operational expenses.

Embedded lending

In the past, if your clients wanted to borrow money or get a credit card, they had to visit a bank branch. Both of these are too much work from a modern point of view. These days, it’s pretty common the clients to borrow money wherever and whenever they shop. 

We've talked about BNPL (​Buy Now Pay Later) before, but to go into more detail, Klarna, Affirm, and other big names in the industry say that 70% of BNPL users are Generation Z and Millennials. Not a big surprise here. 

BNPL is a quick, easy, and often interest-free way to pay for a small purchase over time. With an embedded lending option like BNPL, customers don't have to go to a bank, open an account, and fill out heaps of paperwork to buy something for $100, and this happens to be the major success factor for embedded lending solutions.

Some may argue, but for me, BNPL is a form of credit rather than a payment method. And it is only one prominent expression of the possibilities of digital lending as embedded financial service. 

MNOs, banks, and Fintechs around the world develop completely digital lending offerings by embedding different components of the lending process, such as commercial and retail loan origination, credit scoring, and instant decisioning. 

At Software Group, we’ve developed for banks and financial service providers digital lending solutions either as a standalone product or successfully incorporated into digital wallets or agency banking business models - with a focus on customer relationship, ease of use and implementation, and the integration of scalable ecosystems.  

Embedded banking

There are many solutions built around the concept of e-money that to an extent aim to replace the traditional checking and savings account and that work well in a business context. 

Shopify’s banking feature, for example, provides businesses with embedded banking,  in a similar way, offering small business owners to set up a separate bank account for their business instead of using their own checking and savings accounts.

Many fintech companies have started to offer built-in solutions for things like card issuance, payment processing, risk scoring, and other services that traditional financial institutions usually offer. 

As you can see from the examples above, embedded finance can make banking aspirational, user-friendly, and integrated and this is just the beginning. 

Software Group has enabled banks and financial service providers across the globe to build new, innovative models of banking on their markets - all through our comprehensive digital banking platform and prebuilt solutions.