Embedded finance is transforming markets by integrating digital banking services into non-financial platforms and applications. It enables Facilitators (organizations whose business model focuses on serving niche communities) to offer financial products like lending and payments without building their own financial infrastructure or securing regulatory approvals. As a result, associations, banks, credit unions, franchisors, growth and advisory firms, manufacturers, and media and publishing companies can embed financial services directly into their existing digital ecosystems, providing a seamless experience for users.

Addressing Key Business Challenges

Embedded finance offers solutions to several business pain points. Traditional banking models often require customers to engage with separate providers for various financial needs. Embedded finance shifts that model by integrating services directly into the user’s digital journey, enhancing convenience and reducing friction.

For Facilitators—the connectors, innovators, enablers, and distributors Vastly serves—this evolution presents significant opportunities:

1. CUSTOMER ACQUISITION AND RETENTION
   By embedding financial services within existing platforms, businesses can improve their user experience, reducing the need for customers to seek alternatives. This added value fosters loyalty and strengthens relationships with customers, employees, suppliers, and partners.
   
   
2. NEW REVENUE STREAMS
   Embedded finance opens doors to new monetization opportunities. Facilitators can earn transaction fees, offer premium financial services, and cross-sell complementary products within their ecosystems. By integrating financial products into their existing user base, they can increase the lifetime value of customer relationships.
   
   
3. DATA-DRIVEN INSIGHTS
   Leveraging embedded finance also enables businesses to gather data on user behavior and preferences. This data can be used to deliver personalized financial experiences and tailor product offerings, enhancing the overall user journey.
   
   
4. LOYALTY AND ENGAGEMENT
   A frictionless experience that addresses multiple needs within a single platform creates deep customer loyalty. This integrated approach reduces the chances of users seeking external solutions, keeping them engaged within the business’s ecosystem.
   
   

Creating Value with Embedded Finance

Associations, banks, credit unions, franchisors, growth and advisory firms, manufacturers, and media and publishing companies are now exploring how embedded finance can enhance their offerings by integrating financial services within their platforms. These industries can benefit in various ways, for example:

• ASSOCIATIONS can offer financing options to help members spread costs over time, such as membership fees, equipment, or inventory purchases.
  
  
• BANKS AND CREDIT UNIONS can extend their reach by partnering with nonfinancial platforms to deliver personalized financial products.
  
  
• FRANCHISORS can integrate lending solutions for franchisees to streamline the financing process for new locations or expansions.
  
  
• GROWTH AND ADVISORY FIRMS can offer embedded lending or financial planning tools to enhance their client services.
  
  
• MANUFACTURERS/DISTRIBUTORS can embed payment solutions to simplify the procurement process for suppliers and  consumers.
  
  
• MEDIA AND PUBLISHING COMPANIES can embed subscription financing options or reward and loyalty programs to deepen customer engagement.

By embedding financial services, Facilitators create more convenient experiences for customers, leading to increased engagement and loyalty within their ecosystems. In emerging markets, this model can even serve as the first interaction unbanked individuals have with financial services—through smartphone applications rather than traditional banks.

Preparing for the Future

For Facilitators seeking to capitalize on embedded finance, it’s essential to consider the following steps to stay ahead in this evolving landscape:

• MONITOR TRENDS: Keep up with best practices and innovations in embedded finance to uncover new opportunities that can enhance your offerings and strengthen your ecosystem.
  
  
• INVEST IN DIGITAL INFRASTRUCTURE: Ensure your platforms are equipped with the right digital backbone to support seamless financial integrations. This includes upgrading your systems to handle embedded finance transactions efficiently.
  
  
• LEVERAGE APIs: Utilize API banking to streamline the spread of digital financial services across your ecosystem. This approach enables rapid and secure integration, improving user experience and creating new revenue streams for your business.

By staying ahead of these trends, Facilitators can unlock new revenue streams and improve customer engagement. Embedded finance isn’t just about adding services—it’s about enhancing the overall digital experience..

As Vastly continues to empower Facilitators across industries, integrating embedded finance solutions becomes a key part of driving digital transformation and helping businesses build more connected ecosystems. Schedule a call to explore our embedded finance products and discover how we can help your organization integrate seamless financial solutions into your digital platforms.

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Source: “Tech Translated: Embedded Finance”, PwC (June 18, 2024)