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New technology combined with the progressive Open Banking phenomenon is creating new growth and value opportunities all across the global economy.

One of the biggest opportunities is embedded finance, which has been hitting the headlines lately. Put simply, it enables non-financial service companies to seamlessly integrate financial services into their business model through APIs.

A recent report by Lightyear Capital estimates that embedded finance will grow to £164 billion in revenue by 2025, which represents a ten-fold rise from £16 billion last year. Wider industry analysis goes a step further, suggesting that embedded finance could be worth $7 trillion by 2030, twice the combined value of the world's top 30 banks today.

The automotive industry is one that’s really embraced embedded finance, with ridesharing apps like Uber and Lyft something of a poster child for the burgeoning movement. These apps have evolved over time and now offer embedded financial services to enable customers to pay right from the app after the driver drops them off.

And when someone buys or leases a vehicle, dealers would typically contact a financial institution to better understand affordability and credit risk. But this is now shifting. Tesla’s direct sales model is a great example of how embedded finance is transforming the industry. Buyers could already use some car sites and apps to pay their leases, bypassing the dealer, but Tesla has gone a step further by offering car insurance as well.

Democratised financial services, as simple as ‘point and click’

The really compelling feature of embedded finance is that it’s for everyone – it’s an option for businesses of all shapes and sizes. Ambitious brands, regardless of whether they operate in the automotive, retail or travel sector, can now embed an easy-to-use financial service in their website or app.

Banking-as-a-Service (BaaS) platform Railsbank has provided perhaps the best analogy, likening embedded finance to what Apple’s iTunes did for the music industry. Fuelled by the growing API economy, embedded finance is deconstructing financial products into core digital components, much like iTunes deconstructed music into a single digital track. Embedding financial services into apps and customer journeys is now, therefore, as simple as ‘point and click’.

As such, more and more non-bank brands are offering embedded financial services, such as bank accounts or wallets, payments, and lending, in a targeted effort to increase customer acquisition and retention. For their customers, the major appeal is ease of use: a small business can now get a bank account or loan from its accounting software, or a consumer can pay via the retailer.

Embedded finance is central to the concept of increasing customers’ so-called ‘lifetime value’. Venture capitalists, such as Angela Strange at Andreessen Horowitz and Matt Harris at Bain Capital Ventures, have been encouraging their portfolio companies to consider embedded finance as a key monetisation lever, “making every company a fintech company.”

Getting ready to enter the embedded finance arena

Companies wishing to enter the lucrative embedded finance arena have a lot to consider. They must provide solutions that fit current demands. The pandemic has accelerated digital transformation across the board, cementing the importance of intelligent customer acquisition.

The application and onboarding process for financial products, whether a bank account, loan or asset finance, needs to be as easy and intuitive as the likes of Amazon and Netflix.

Luckily, companies can now access customer acquisition software that draws on advanced analytics and the data-rich Open Banking environment to streamline the onboarding journey by introducing intelligent automation and providing applicants with a better user experience.

And just as banks and other incumbent lenders must move quickly to build real-time transaction data and analytics into their credit decisioning software, so must other brands. This enables them to make more accurate credit decisions quickly, based on a holistic assessment of each borrower's situation.

Teaming up with Ezbob

With new API technology advances, we know the emergence of embedded financial services has become an important growth area for forward-looking companies.

Using Ezbob Express’s robust API strategy, any brand, regardless of sector, can embed a financial service into their purchase process, such as customer accounts opening, credit card applications, consumer and business loans, overdraft facilities, asset finance and invoice financing.

Ezbob Express transforms customer onboarding into a streamlined, automated digital journey, reducing customer input by 75% and increasing completed applications by 400%. A quick and seamless process.

Thanks to its proprietary AI-enhanced decisioning algorithms, Ezbob Express can also make precise credit decisions in real time, providing customers with the instant, personalised offers they now expect.

Get in touch to discuss how we can help you to take advantage of the embedded finance opportunity.

Tags: Customer Acquisition