Embedded finance refers to the integration of financial services into non-financial products or services, such as B2B commerce platforms. This can involve incorporating payment or lending capabilities into a seamless purchasing experience without leaving the seller’s website or app.
The acceleration of digital adoption has expanded opportunities to embed finance. According to McKinsey, embedded finance reached $20 billion in revenues in 2021 and is expected to double in size within the next three to five years. Examples of embedded finance include:
- Buy now, pay later
- Applying for trade credit during checkout
- Opening a bank account through a nonbank platform
- Buying point-of-sale insurance
Integrating financial products is becoming more common because of its convenience and benefits to providers, partner banks, and end customers. Partner banks can reach more customers by working with nonfinancial partners. Meanwhile, embedded finance boosts provider revenues and customer loyalty by improving the customer experience.
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