SIGNIFICANCE OF EMBEDDED FINANCE IN PANDEMIC STRICKEN ECONOMY
Small Enterprise|August 2021
The banking and financial services for many Indians have shifted to digital post-pandemic. As per the leading company Forrester, even before the pandemic, 59% of the Indians were open to accepting a digital-only bank. This trend has become more widespread after Covid and financial services are now moving towards a digital platform.

What is embedded finance?

It is a financial solution, like payments or funds embedded into a non-financial company to offer a seamless and customised customer experience.

With an increase in non-banking services around the world, embedded finance has emerged as a popular option. It is estimated the size of the global embedded finance market will reach approx. $7 trillion by 2030.

The dynamics of the global economy have also changed post-COVID-19. The crisis surrounding the pandemic has made many investors and businesses shift their focus towards people. The significance of human impact has surpassed economic impact.

The top agenda for businesses is people’s access to health infrastructure, human equality, and societal welfare. Businesses are understanding that these social and environmental issues have a direct influence on economic stability. This is why embedded finance has become a focus for everyone.

Understanding Embedded Finance

Many non-banking providers have started integrating financial services into marketplaces and other services. Technology companies have started playing a crucial role in the financial decisions of businesses and consumers and this phenomenon is called embedded finance.

Below we list some embedded finance examples:

Consumer Lending Businesses: In India, the penetration of Credit cards remains only 59 million. This is a small number considering that in India, 800 million have a bank account. Many credit providers that have their base in Point of Sale (POS) include companies that work on Buy Now Pay Later principal. These companies help to ensure credit flow to the consumers and this helps to increase the Average Order Value for the merchants.

Payment Companies: The payments landscape in India has been transformed with UPI. It has made it simple for technology companies to turn into payment providers. The technology platforms like Amazon, Ola, Google, and WhatsApp are now providing payment-related services.

Insurance: Availability of various nano insurance products has now been embedded into the technology platforms. This has helped to increase the awareness of these products among Indians.

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