Financial services are seamlessly integrating into non-financial industries and businesses. This integration of finance into other sectors is rapidly picking momentum and gaining traction. Incorporation of diverse functions like lending, payment processing, payment gateways, etc. in customer journeys is fueling diverse multidimensional opportunities to boost marketing ROI and bottom line!
Let’s further explore how thoughtfully designed financial embedding holds the key to transforming marketing models and powering businesses to maximize returns across various metrics.
Defining Embedded Finance
Embedded finance refers to the seamless integration of financial capabilities directly into a company’s existing customer touchpoints and interfaces. This creates a unified brand experience rather than sending customers to third-party financial providers.
Examples
- Enabling payments directly within a brand’s app or website.
- Providing microloans or installment plans at checkout.
- Accepting loyalty program points as a transaction currency.
- Offering savings accounts natively within the brand environment.
The Rise of Embedded Finance
Embedded finance is growing rapidly in stature and adoption, over the past decade. While still an emerging paradigm, several key factors are driving more non-financial brands to embrace embedded financial capabilities:
Customer Demand
Today’s consumers expect seamless digital experiences. Financial services integrated natively into brand apps and websites align with these expectations for convenience, personalization, and immediacy. Rather than managing finances across disjointed apps and providers, customers appreciate unified money management.
Advancing Technology
Advances in financial APIs, automation, data analytics, and infrastructure have made it faster and easier to embed lending, payment processing, and account management functions into non-financial platforms. Integrations that once took months can now be implemented in weeks. This makes financial embedding more accessible.
Revenue Diversification
The ongoing unbundling of financial services has also pressured non-financial brands to diversify revenue streams beyond core offerings. Embedding complementary financial capabilities allows brands to tap into new income channels like interest, fees, or interchange. This provides financial upside and insulation against fluctuating core business.
Pandemic Acceleration
The COVID-19 pandemic accelerated the demand for contactless digital transactions and financially integrated experiences. As in-person interactions declined, embedded finance adoption grew. This proved both the viability and advantages of embedded models, encouraging further investment.
Competitive Necessity
As pioneers demonstrate exciting possibilities, embedded finance is becoming essential for competitiveness. Companies risk losing ground by maintaining disjointed financial experiences. Integrated models often increase loyalty and engagement.
Embedded finance helps satisfy multidimensional consumer, technological, and competitive trends. It represents the next evolution of experience design for both, financial and non-financial brands.
Key Benefits of Embedded Finance for Marketing
Frictionless Transactions
By allowing customers to securely pay, get financing, or set up accounts directly within existing touchpoints, embedded finance removes tedious financial friction from brand interactions. Customers appreciate the speed and convenience.
This seamlessness converts more marketing-driven leads into sales by accommodating impulse purchases and enhancing checkout completion rates.
Rich Customer Insights
Each embedded financial transaction generates an additional layer of customer data like purchase amounts, payment choices, financing terms, and repayment activity. Analyzing this data allows remarkably precise audience segmentation and campaign personalization based on financial behaviors. Hyper-targeted promotions then resonate at a higher level.
Maximized Loyalty
Loyalty programs supercharged by integrated rewards redemption, points-based payments, and exclusive financing offers encourage higher engagement. Customers who actively participate in loyalty programs have much higher lifetime value. Easy embedded financial perks provide incentives to remain loyal and engaged with the brand community.
New Revenue Streams
While enabling transactions is the most obvious benefit, embedded lending, savings, and accounts also create new income channels through interest, interchange fees, annual membership fees, or other financial revenue models. Diversified income insulates brands from fluctuations in core business.
Holistic Brand Experience
Strategic financial embedding meshes so tightly with the brand experience that it feels like an organic extension rather than an add-on. For example, outdoor retailers could offer integrated financing on adventure trips or equipment purchases. This deepens customer relationships beyond one-off transactions.
The combination of frictionless engagement, data-driven personalization, reinforced loyalty, and diversified revenues provides interconnected benefits that allow marketers to continually enhance results across metrics when leveraging embedded finance thoughtfully over the long term.
Strategic Considerations
Align with Brand Ethos
Financial offerings should map neatly to existing brand positioning and audience expectations. Outdoor apparel shops providing financing for adventure trips make intuitive sense. The same for a premium brand offering exclusive payment cards. Mismatched financial services will confuse rather than excite customers.
Roll Out Gradually
It’s better to phase in embedded capabilities over time rather than launching an exhaustive suite all at once. Start with the capabilities that seamlessly align to solve an obvious customer need. Then build on the foundation incrementally to gain comfort. Gradual roll-out allows proper testing and optimization.
Leverage Fintech Partners
Most non-financial brands will lack the technical capabilities or regulatory licensing to build financial platforms entirely in-house. Strategic fintech partnerships allow brands to launch quickly with reliable and compliant solutions. Partners provide the infrastructure while your team focuses on smooth integration and customer experience.
Prioritize Security
Customers have strict security expectations when dealing with financial data and transactions. Brands must invest heavily in data encryption, redundancy, fraud monitoring, and accessibility controls. Adhering to fintech security best practices is fundamental, as any breach erodes consumer trust immensely. Ongoing security testing is a must.
Culture of Compliance
Given the intensifying financial regulation, compliance should be top of mind throughout the process. Brands must monitor regulations in all jurisdictions and structure programs accordingly. Having dedicated compliance staff pays dividends when navigating complex policy requirements to avoid missteps.
Educate Internal Stakeholders
The shift toward embedded finance will impact staff across technology, marketing, product, design, and compliance teams. Educating these internal stakeholders early and continuously gives them context on the paradigm shift. This ensures constructive collaboration across departments, smoothing the transition and optimizing execution.
Conclusion
Embedded finance represents a disruptive but potentially lucrative evolution of not just financial services but the customer experience as a whole. By thoughtfully embedding complementary financial capabilities within existing brand touchpoints, non-financial businesses can enjoy compounding benefits across loyalty, revenue streams, and critical marketing ROI.
With wise execution and a long-term roadmap, embedded finance can transform dated marketing models and propel businesses forward in an increasingly integrated economy.
