The integration of financial products and services into digital ecosystems is transforming commerce.
“With the advancements of technology and the platforms businesses rely on to run their operations, they are looking to integrate financial products to give their customer base more value,” Ben Griefer, COO at Maverick Payments, told PYMNTS for the series “What’s Next in Payments.”
“On the flip side, it ultimately drives more revenue,” he added.
While historically, non-financial platforms and applications were hesitant to venture into financial services, steering clear of payments, banking products and lending due to the complexities involved, these barriers have diminished as turnkey technology marches on.
The term “embedded finance” can include anything from offering loans at the point of sale to providing insurance within a product purchase journey. The goal is to create a more seamless and convenient experience for customers, who can access these services without leaving the platform they are already using.
Embedded Finance in eCommerce and Beyond
Platforms like customer relationship management (CRM) systems and shopping cart platforms, which businesses rely on for daily operations, are now able to offer financial products. This integration fosters a “stickiness factor,” as Griefer described it, enhancing customer loyalty and retention.
The embedded finance model also allows businesses to collect data on customer behaviors, he noted, such as spending habits and chargeback history. This data can be used to offer personalized financial products and services, such as tailored loan offers or customized insurance plans.
By leveraging this data, businesses can better understand their customers’ needs and provide more relevant and timely financial solutions. This personalization not only improves customer satisfaction but also increases the likelihood of customers using these services.
And for merchants, the integration of embedded finance presents lucrative opportunities, especially in the card-not-present eCommerce sector.
According to Griefer, platforms that focus on subscription management, eCommerce websites, and similar services are looking to offer financial products like fraud prevention, chargeback management and payment processing. The key to success in these integrations lies in a frictionless onboarding process, which is crucial for achieving high adoption rates.
Adoption Trends and Future Directions
The adoption of embedded finance varies, with payments, lending and general banking products being the most prevalent. Griefer explained that the adoption often depends on the specific needs of the platform’s end users. For instance, business-to-business (B2B) platforms may see more adoption in commercial card issuance, while eCommerce platforms may focus on payments and fraud prevention.
A critical concern for businesses considering embedded finance solutions is scalability. Griefer emphasized that these solutions are highly scalable, leveraging the infrastructure and technology of established payment processors, such as Maverick Payments. This approach allows businesses to white-label payment systems, thereby benefiting from robust compliance and regulatory frameworks without the associated overhead.
“It’s extremely scalable,” Griefer said, “because businesses can focus on their core offerings while relying on our infrastructure for payments and compliance.”
And market sentiment around embedded finance is positive. As businesses become more educated about the benefits, there is a growing interest in integrating these solutions. While platforms from the software-as-a-service (SaaS) world may not have a traditional payments background, they recognize the value of offering financial services to supplement their core products, Griefer explained.
That’s why, as embedded finance continues to evolve, Griefer predicts further integration of financial services into non-financial platforms. “There’s a huge need for businesses to have more tools and services at their fingertips,” he said, pointing to the potential expansion into areas like payroll and more sophisticated banking services. The trend suggests that businesses will seek to offer a consolidated system that can handle various financial and operational needs, providing a comprehensive solution for their customers.
