Embedded finance is being hailed as the next “big thing” across the financial services industry. Promising a transformative change to the way businesses access and offer financial platforms and data, it’s easy to get caught up in the excitement for the coming developments.
While you may have heard about it in the context of an upcoming trend, did you know that embedded finance is already being adopted by businesses around the world?
To bring this to life, we’ve compiled a guide to the various types of embedded finance already in existence, along with real world examples of how they’re being used.
But before we get into that, let’s recap some of the basics.
What is embedded finance?
Embedded finance enables businesses to insert external financial technology, data, and systems into their own platforms. This allows businesses to access new areas of the market, generate additional revenue streams, or offer new products to customers.
A major benefit of embedded finance is its low cost and fast time to reach the market, in comparison to investing in a new offering from scratch. By doing this, businesses can integrate new capabilities faster and to a higher standard than previously possible.
Types of embedded finance – with examples
As is the case with financial services as a whole, embedded finance covers an enormous breath of industries, functions, and financial markets.
Within these verticals, there are equivalent embedded opportunities that cater to different business needs.
1. Embedded lending
Embedded lending allows businesses to add credit services to their offering.
This could be anything from formally offering loans, car finance, or credit cards, through to accessing lending data that’s then used to enrich other services offered to customers.
Embedded lending examples
Asda—one of the UK’s “big four” supermarkets – integrated the Aro embedded lending technology into their customer experience platform, enabling them to offer loans and credit services to customers seamlessly in the Asda Money environment.
By combining their own first-party customer data, with our lender panel – one of the largest in the UK – customers are able to complete an eligibility check with Asda Money and we can return their results within the Asda Money platform, saving customers time and creating a smoother experience.
2. Embedded payments
In recent years, there has been a gradual shift towards the adoption of single-click checkout processes, designed to create a more seamless checkout experience for users.
Consumers have become increasingly comfortable with using a one-click “Buy Now” button in familiar, trustworthy retail environments.
Embedded payment examples
Embedded solutions like Stripe and Shop Pay are both excellent examples of embedded payments.
A customer that has signed up for Shop Pay, provided by Shopify, will be able to use their existing credentials wherever a retailer offers an option to checkout with Shop Pay.
3. Embedded investments
More recently, investing has broken into the mainstream of public life.
Gone are the days of trading exclusively through stock brokers, today’s consumers have the option to invest through a variety of apps and embedded solutions, which incorporate investment tech into a consumer-facing front end.
It’s therefore no surprise that embedded investment solutions are becoming increasingly appealing for many businesses.
Embedded investment examples
Apps you may have seen in the headlines—such as Robinhood, Cash App, and Acorns—are all examples of embedded investment technology.
Without leaving the app or interacting with an investment advisor, users can sell, buy, and exchange stocks.
4. Embedded insurance
For many retailers, the ability to offer insurance on products at the point of sale presents a huge upselling opportunity.
Customers shelling out for a high-price item, like a new TV or furniture set, will often be willing to pay a small amount towards additional insurance for some extra peace of mind.
With embedded insurance, the service itself is set up and managed through a third-party but, from the consumer’s perspective, it’s all coming from the retailer of their product.
Embedded insurance examples
International home and furniture giants IKEA recently launched the aptly-named HEMSÄKER, an insurance solution branded in their own Scandinavian-inspired style, but fulfilled entirely by an external embedded insurance provider.
5. Embedded banking
Embedded banking specifically relates to the provision of traditional banking services, such as checking accounts and debit cards, within a non-banking environment like a retailer or any other marketplace.
Embedded banking examples
One example of embedded banking is Shopify’s Balance platform, which aims to persuade small business owners and start-ups to open separate business bank accounts, rather than using personal checking accounts.
How Aro can support your business
Has embedded finance piqued your interest? Allow us to take you through our own technology offering, which caters to providing embedded lending capabilities for businesses.
Access to the UK’s largest digital borrowing marketplace
With our embedded finance proposition, businesses gain access to the largest digital borrowing marketplace in the UK.
Why does the size of the marketplace matter? With such a broad panel of lenders, we can offer your customers a huge amount of choice, with tailored solutions to suit most credit profiles.
What’s more, you can configure lending panels to cater for your customer and business needs—so you’re only using the parts that work for your offering.
Having access to a wider range of lenders makes your offering both scalable and futureproof in the current climate.
Technology that enables businesses to rapidly bring new services to market
A key aspect of the embedded finance opportunity is the ability for businesses to access the speed and scalability to bring new revenue streams to market, fast.
With our embedded finance API, we integrate our enhanced decisioning platform into your online journey, creating a seamless experience for your customers.
What does this look like in practice? In cases where a customer has already provided you with their personal details, we can pre-populate these into our application form, saving your customers time and providing a better overall experience, or even return a success message in your own environment before the customer is prompted to come to Aro. What’s more, if all the customer’s required details are captured in your platform, APIs allow us to drop them straight into a results environment.
In other words, by embedding the services that customers can access by coming directly to Aro, you can offer a more rounded experience and range of products to your clients, all within your own ecosystem and customer journeys.
A safe pair of hands, with a proven track record in embedded finance
Aro can support your business using our experience and expertise in the financial services industry, whether it be help marketing financial products or support with risk and compliance. The level of support can be tailored to your business requirements, and we can also provide additional insights into your customers that come through our platform.
While others are only just entering the market, we have longstanding, successful embedded finance partnerships with businesses from a whole range of industries, including banking, retail, and eCommerce. We are experienced in partnering with businesses from both finance and non-finance industries, making us best placed to offer you guidance on what integration might work most effectively for your business proposition.
Ready to get started? Explore your embedded lending opportunity today
With the largest digital borrowing marketplace in the UK, we’re ready to support you in bringing an embedded finance proposition to market.
Ready to get started? Reach out to our team and we will be happy to run through our embedded finance solutions, or start setting up your new embedded lending offering.