There has been an acceleration of digitization in the financial sector as a result of the wave of usage in online purchasing. This groundswell in online purchasing has led to the revolutionizing of one-stop markets for both products and services.
Nowhere is that more evident than in Fintech, where embedded finance has taken hold in a major way.
Why embedded finance is the future of fintech
Embedded finance means a consumer can consume financial products or services from companies outside the finance space. This opens up a massive opportunity for apps to engage with their users. And those that have taken advantage of it have reaped the benefits - eighty-five percent of the companies that implement embedded finance report increased engagement, saying that it helps them acquire new customers in the new value chain.
It's obvious why it does. Embedded finance creates an enhanced customer experience. By removing stress and inconvenience — for example, removing traditional barriers to seek credit elsewhere — customers will be more likely to experience customer satisfaction — essential in achieving customer loyalty. No wonder analysts predict a ten-fold increase over the $22.5B in revenues in 2020.
Why is this so important? Because companies that aren’t in Fintech naturally will want to find ways to offer this enhanced user experience to grow their own outreach. Shopify, again, is an example of a company offering lending services as well as bank accounts to businesses. Udaan and Grab have made similar moves with innovations like Udaan Credit and GrabPay.
This trend has brought other companies seeking to provide a bridge between traditional financial institutions and non-financial businesses, such as us at SnapTrade.
Here are just a few samples of what sectors of the economy in which embedded service now works.
Which financial services can be embedded?
- Embedded Banking
- Embedded Payments
- Embedded Payment Cards
- Embedded Lending
- Embedded Insurance
- Embedded Investing
What is embedded investing?
The world of investing can be a forbidding jungle. Making it more accessible is the goal of companies such as Passiv, Blossom, Simply Wall Street, and AInvest.
Embedded tools in investment applications allow users to connect with their traditional brokerage in a way that suits their personal financial situation and their spending habits.
Why embedding investment is the next frontier
Managing the investing process takes time, expertise, experience, and is limited to the tools offered by a traditional brokerage – that is unless you have an embedded finance solution.
There are online platforms and apps galore for different goals and skill levels. Experienced investors can evaluate the values of stocks and buy natively on their research tool of choice. People new to the practice can automate these financial decisions, investing a set dollar amount or even spare change every month via an automatic bank draft - without ever having to login to a brokerage.
Collaboration between investors and institutions can include offering lending services or creating embedded bank accounts for businesses. Also, can act as a connector or a bridge between financial-service providers and non-financial businesses. This may resemble a data transfer network, used by businesses willing to offer financial products.
The third option is to collaborate with a company that focuses on embedding the financial infrastructure into its product or service and become a part of that ecosystem.
The embedded finance market has the potential to be worth over 7 trillion dollars by 2030— greater than the current value of all fintech startups and the top 30 banks combined. No wonder embedding investment is the next frontier.
How to offer embedded finance investing products and services
Accessibility opens up investment opportunities to a wider audience, including those who may have previously been deterred by the complexities of traditional investing.
Embedded investing experiences can offer solutions to a wide variety of problems for fintechs.
Reducing the barrier to entry: providers can help reduce friction in user onboarding by syncing user's entire portfolio and history in a couple of steps, rather than manually entering everything. This makes it quicker and more simple for users to make an account and maximizing the value of the product.
Engagement: companies can enable powerful new engagement loops to prompt their users to take an action, such as place a trade or reinvest a dividend. Creative ways to provide value to their users creates brand loyalty.
Personalization: adding new features that tailor the experience to the user’s investments. If a platform knows the makeup of user’s portfolio, they can show the user things that are relevant to them - from content to research, and beyond. Having a personalized experience increases usage and brand loyalty.
Convenience: With embedded finance, users can seamlessly invest and manage their portfolios without the need to switch between multiple platforms or applications. The integration of financial services into non-financial platforms simplifies the investment process, saving time and effort for investors.
The Future of Embedded Investing
As embedded finance continues to gain traction, the future of investing looks promising. Here are some key trends to watch out for:
1. Democratization of Investing: Embedded finance has the potential to revolutionize the global investing sector by making investing more accessible and inclusive. Through new investing experiences, individuals from all walks of life can participate in the financial markets and grow their wealth, regardless of their financial knowledge or background.
2. Partnerships between Fintech and Non-Financial Companies: We can expect to see more collaborations between fintech companies and non-financial platforms. These partnerships will facilitate the seamless integration of financial services into everyday applications, providing users with comprehensive and user-friendly investment experiences.
3. Rise of Automation: Automated investment platforms use algorithms to make investment experiences quicker and take less time, two benefits that users will increasingly expect. These platforms leverage embedded finance to provide individuals with personalized investment feedback and automated portfolio management.
4. Increased Focus on Financial Education: With embedded finance, individuals will have easy access to educational resources and tools to enhance their financial literacy. This focus on financial education will empower users to make informed investment decisions and improve their overall financial well-being.
How SnapTrade API Is Navigating The Future of Embedded Finance
SnapTrade is the API used to connect users to their brokerage accounts within any fintech app, such as Passiv. It enables API access to a wide number of brokerages and crypto exchanges with purpose-built API connections. Through these integrations, users can pull real-time account data, historical transactions, and trading. Users can even place trades.
There are endless possibilities for building new investing experiences. With the features and brokerages available, the capabilities that apps can build use cases with is wide and deep.
Embedded finance is revolutionizing the way individuals invest by integrating financial services into non-financial platforms. This innovative approach enhances accessibility, convenience, and personalization in the investment process. As the future of investing unfolds, embedded finance is set to play a pivotal role in reshaping the global financial economy.