Embedded finance is making click buys easier

Browse, select, click and pay is a common enough sequence. The ease of buying on e-commerce sites has been enabled by the embedded finance. Technology companies are increasingly adding a layer of connection between a banking firm and a consumer-facing organisation. The layer of connectivity embeds a financial transaction interface that allows a consumer to make a payment or purchase without leaving an app or a site. 

The transaction could be a payment for a product or a service. Most importantly, the payment could be for an unrelated product but available on the same site. For example, while buying an electronic device, the site could offer an insurance cover as well. The buyer could then buy the device and insurance from two different organisations but on the same platform or app. 

“The embedded finance industry is expected to grow steadily during 2022-2029. The embedded finance revenues in India will increase from US$4.8 billion in 2022 to reach US$21 billion by 2029,” according to a report by Researchandmarket.com. “Over the last few quarters, embedded insurance has emerged as a promising distribution innovation for insurers. India has experienced a massive demand for embedded insurance services in the travel industry in recent quarters.” 

According to the report, firms such as MakeMyTrip and Amazon have built contextual insurance products within their “core purchase journeys”. Travel and mobility firms like Ola and IRCTC are also embedding various financial products for their consumers. 

Technology companies are increasingly adding a layer of connectivity between banking firms and consumer-facing companies. This allows consumers to pay without leaving a site.

Leading companies like Oracle are working with global players to boost the tech layers, which is deepening the impact of embedded finance. “We have a complete stack built entirely on the cloud, from Cloud Applications to Cloud Infrastructure (OCI) to Oracle Database, all seamlessly integrated and built on an interconnected architecture that allows us to connect to any process and innovate. We realised that ecosystems must go where the customer is or is spending their time, rather than forcing them to come to a bank. This entails an embedded finance strategy that improves the user experience by, for example, integrating the bank’s ERP system with their customers to increase productivity through seamless, real-time data flows between systems,” says Prasad Rai, vice-president, Strategic Clients Group, Oracle India. 

Effectively, embedded finance brings the efficiency of a financial institution inside a non-banking consumer-oriented company’s system. This means that nearly any company offering any product can also operate as a fintech company. “We have now officially entered the digital era defined by banking 4.0, which is essentially embedded, ubiquitous banking built into the world around us via the technology layer. Embedded finance is critical in the digital banking framework because it facilitates the advancement of an ecosystem-based innovation that allows financial services to be delivered directly into non-financial websites, mobile apps, and business processes,” says Rai. 

The banking and financial institution is able to reach out to a new set of consumers. Says Shalini Warrier, executive director, Federal Bank, “The integration of financial services for non-banking institutions serves a dual purpose. First, it expands the capabilities of platforms and services by incorporating finance into its processes. Second, it gives banks access to a wider and larger group of customers, who are keen to experience banking through the lens of fintechs. Integrating banking systems and processes with customer processes increases productivity by allowing seamless and real-time data flow between systems. This in turn helps form a partnership ecosystem between customers, organisations, and the banking ecosystem at large.”

With product and financial sellers on the same page, the consumer finds it easy to just click through and buy. The end result is a win-win for all the entities.