Related Terms
DEFINITION
Embedded Finance
Embedded finance refers to the integration of financial services, such as payments, lending, insurance, or general banking, into non-finance platforms and applications. This is done to minimize customer frustration and to make a smoother transaction process. The most common form of embedded finance the average person is going to come into contact with is having the ability to pay for a product or service directly on the business’ webpage, without being redirected to a separate platform. This is commonly seen in the retail industry but also travel and even healthcare.
Embedded finance often relies on the use of APIs and digital wallets in order to be widely accessible. This is why it’s especially popular with digital-native banks.
Synonyms
Integrated financial services
Acronyms
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Synonyms
Integrated financial services, built-in banking features, seamless finance solutions
Acronyms
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Examples
Thanks to embedded finance, many e-commerce websites allow users to make payments directly within the page and even get insurance for their new product or use a buy-now-pay-later plan. For example, buying things on Amazon. Embedded finance also streamlines peer-to-peer payments, allowing users to easily split costs or send money to one another by using a finance app, such as Paypal.
FAQ
What is the difference between embedded finance and fintechs?
While both aim to streamline and modernize financial transactions, embedded finance and fintech are used in different contexts. Namely, embedded finance integrates with non-finance platforms and applications to allow for transactions to be processed. Fintechs on the other hand integrate with financial platforms and applications to better parts of or entire processes. For example, Atfinity can integrate with a bank in order to automate and streamline their onboarding. However, it can’t integrate with Amazon to process payments.
Is embedded finance the same as open banking?
While both leverage APIs and involve the collaboration of different businesses, embedded finance and open banking are quite different in practice. Open banking strictly refers to the sharing of information between banks and third parties in order to offer users tailored services. For example, so that a budgeting app can give the user tailored advice on how to save money. Notice however, that this is a separate platform and that both are within the finance industry. Embedded finance on the other hand processes payments for non-finance platforms, such as e-commerce stores, so that transactions can be done within a single platform.
What types of finance services can be embedded?
The most common financial services that utilize embedded finance are payments, lending, insurance, and account management.
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