Real-world examples of embedded finance

Embedded finance is experiencing significant growth, with the volume of payments made through embedded finance channels reaching $2.5 trillion in 2021, and projections estimated to reach $6.5 trillion by 2025, according to a report by Ernst & Young. This rapid expansion is expected to disrupt various industries as companies strive to provide seamless and personalized experiences to their customers.

And here’s how you (and your customers) can use embedded finance to enhance the customer experience and drive growth for your businesses.

Embedded finance refers to the integration of financial tools into non-financial applications and websites, making services more accessible and convenient for users. This approach is similar to banking as a service (BaaS), but it focuses on providing these tools directly to consumers within the platforms they regularly use, thus eliminating the need to switch between different applications.

With BaaS, fintech companies can develop and integrate financial services through technologies like APIs. Embedded finance takes this concept a step further by incorporating these financial capabilities into the products or services where customers already spend their time online. 

Rather than visiting separate financial websites or apps, embedded finance brings those financial tools directly to wherever customers shop, travel, get rides, and more. It integrates banking into the platforms they already use regularly, ensuring that managing money doesn't disrupt their workflow and, instead, operates seamlessly in the background.

Embedded finance has the potential to transform how people experience and interact with money across various industries. Here are five real-world examples of embedded finance in action.

In the e-commerce world, embedded finance transformed the way consumers search for great deals online. With just a few clicks, customers can purchase almost anything through e-commerce platforms. However, this process also presents opportunities for businesses to expand the range of products and services they can offer to their customers.

For example, embedded finance enables online electronics stores to easily offer tailored insurance to customers during the checkout process. The benefits of embedded finance are not limited to online-only businesses. Brick-and-mortar stores can also offer branded credit cards or leverage embedded finance to provide secure, one-click payments through their apps, saving time for both customers and staff while speeding up service experience. Embedded finance companies play a crucial role in this ecosystem by facilitating integrated financial services through various categories, including technology providers and banking institutions.

Cryptocurrency platform Shakepay recently partnered with Marqeta to launch a prepaid Visa debit card that rewards cardholders with Bitcoin instead of traditional cashback. Customers can fund their cards using personal bank accounts or by selling cryptocurrency, and they receive up to 2% in Bitcoin rewards when shopping online or in-store. The Shakepay card attracted over 70,000 customers at launch, with that number nearly doubling shortly after.

Embedded finance simplifies the process of sending money to friends by integrating payment capabilities into the apps and websites that customers frequently use.

Consider a scenario where passengers need to split the cost of a ride share with their friends. Instead of sending the money to one person who then pays the total fare, they could split the cost directly from their rideshare app, allowing everyone to pay their share of the fair instantly.

Similarly, if a coworker covered the cost of lunch for the entire team, they could be quickly reimbursed thanks to embedded payments within their team's communication platform or social media app, eliminating the need to switch between different apps to complete the transaction. WeChat, a popular messaging app in China, exemplifies this concept by offering a digital wallet that enables peer-to-peer money transfers.

This embedded approach streamlines everyday financial interactions with others, cleverly integrating payment capabilities into the platforms where people naturally connect and communicate. 

When shopping in-store, customers may sometimes find that the total cost exceeds their planned spending. However, leaving empty-handed is not always an option. Point-of-sale financing through embedded finance can provide a solution in such situations.

Embedded finance allows stores to collaborate with financing providers to offer customers convenient payment options at checkout. These banking services provide seamless integration of financial solutions, helping enhance user experience and streamlining financial operations. Instead of foregoing a large purchase, such as a new refrigerator, customers can take the item home and pay in more manageable monthly installments.

One notable example of a business using embedded finance to revolutionize the checkout experience is Klarna. This pioneering fintech company enables over 85 million shoppers across 200,000 merchants to "buy now, pay later" with ease.

Klarna's innovative solution eliminates the hassle of applying for traditional credit. Customers can seamlessly split their payments into installments without the need for tedious forms. This embedded financing option streamlines the online checkout process.

By partnering with Marqeta, Klarna can quickly generate virtual cards for each shopper, facilitating secure and frictionless purchases across any online store or marketplace.

Since the beginning of their partnership in 2019, Klarna has witnessed its quarterly transaction volumes double, thanks to empowering customers with Marqeta's embedded payment technology.

Digital wallets simplify money management for consumers and when coupled with Embedded finance, customers are able to store funds, make payments directly from their bank account, and handle banking directly within apps and websites, eliminating the need to switch between different financial apps and tools.

This creates a seamless and simplified financial experience that is integrated into online activities. Moving money in and out, checking balances, and making purchases can be done instantaneously without leaving the platform. Apple Pay is a prime example of an embedded digital wallet. It’s found within the Apple Wallet app but is also embedded across the company's ecosystem of devices, enabling customers to store cards, add  tickets, and make purchases wherever Apple Pay is accepted.

Some apps even allow customers to quickly generate virtual debit or credit card numbers for secure online purchases, all housed within the integrated digital wallet. Embedded finance is transforming the way people interact with and manage their money in the digital realm.

Insurance claims can be a frustrating process, involving extensive paperwork, long wait times to speak with agents, and lengthy delays in receiving payouts. However, embedded finance has the potential to alleviate these issues by seamlessly integrating insurance into the apps people already use on a daily basis.

With virtual insurance card technology, payouts can be issued almost instantly to a digital card or account controlled by the customer, eliminating the need to anxiously wait for weeks to receive a reimbursement check.

Travel companies are also leveraging embedded insurance for scenarios such as lost luggage or canceled flights. The compensation process is built directly into their app's financial services, allowing customers to easily submit a claim with a single tap, without the need for additional logins or separate workflows.

Embedded finance represents the future of money management, integrating financial tools into digital experiences to remove friction and unify banking into a seamless journey. This technology enables modern, user-friendly ways to earn, spend, and move money.

As this innovative approach continues to spread, embedded finance will reshape customer experiences across industries and open up new revenue opportunities for businesses. Companies can launch tailored embedded financial solutions through platforms like Marqeta, which combines modular APIs for accounts, cards, payments, and more, providing businesses with the flexibility to design and control custom financial experiences.

Businesses can unlock new possibilities with Marqeta powering their embedded finance journey. We offer a proven platform that enables companies to stay at the forefront of this transformative technology  and deliver cutting-edge financial experiences to their customers.

So, ready to unlock new growth opportunities for your business, your workers, and your customers? Then contact Marqeta today to learn how to put our embedded finance solutions to work in the real world for all of them.