Businesses scramble to provide embedded finance to satisfy the new age digital Indian consumer

No matter the service, a consumer today wants convenience of payment, and of course digital. The sentence, ‘cash is passe’ is passe.

Enter embedded finance, which refers to the shift from time-consuming bank transfers to the use of financial services or tools by a non-financial provider. Services may include lending or insurance and should create more simplicity and convenience by embedding the financial journey into a customer’s normal non-financial journey.

For example, last May, Indian carrier IndiGo onboarded Juspay as its official payment partner, through which, IndiGo can offer its customers a smooth and secure payment experience for domestic and international flight bookings across 26 different currencies. IndiGo aims to offer hassle free customer experiences across all touchpoints, such as in-flight, ground services, and even digital platforms like their website and mobile app. Such tie ups are part of a movement in the direction of embedded finance.

Super apps have revolutionized the way users engage with digital services. Consumers now expect instant access to a wide array of services within a unified digital ecosystem. By embracing the super app model, banks can provide customers with a unified and personalized experience that goes beyond traditional banking services
Ankur Joshi, Founder and CEO of Nuclei

Ankur Joshi, Founder and CEO of Nuclei, “Super apps have revolutionized the way users engage with digital services. Consumers now expect instant access to a wide array of services within a unified digital ecosystem. By embracing the super app model, banks can provide customers with a unified and personalized experience that goes beyond traditional banking services. Integrating financial offerings with other relevant services will not only help meet evolving customer expectations but also solidify banks’ position as trusted and indispensable financial partners.”

Drive to Deliver Embedded Financial Services Rapidly Accelerating in India

A research from FIS said the drive to deliver embedded financial services is rapidly accelerating in India. More than two-thirds (71%) of financial services and fintech firms will significantly invest in developing embedded finance products within 12 months, according to the study.

44% of the financial services and fintech firms that are investing in embedded finance believe it will increase revenue. 37% of non-financial firms that see an impact from embedded finance on their business will respond by increasing their tech or R&D budget in the next 12 months.

The Future Looks Embedded

According to a Juniper Research study, revenue from embedded financial services will exceed US$183 billion globally in 2027; increasing from just under $65 billion in 2022. The report owed the 182% growth to non-financial businesses incorporating embedded finance options into their product offer.

Its advice is that it’s crucial for businesses to identify which financial services work best within their customer environment, whether B2B or consumer. Choosing products that align with target demographics and offer genuine consumer benefits will be the most successful.

The research identified B2B embedded finance as the next big opportunity. Research author Dominique Tetnowski explains, “Bringing the innovations seen within the consumer environment, such as Banking-as-a-Service, to a B2B environment is a powerful, underserved opportunity. Businesses wishing to offer embedded finance must choose the right offerings, that solve genuine challenges targeted specifically at their customers, or they will lose out to better-targeted competitors.”

Embedded Investments Will Be Fastest Growing

Additionally, the research found that embedded investments, where stock trading and investment products are integrated within other apps, will be the fastest-growing segment, increasing by 421% over the next 5 years; accounting for almost $11 billion revenue globally by 2027. It recommends that brands serving high-net-worth individuals pursue embedded investment strategies, in order to broaden their appeal to premium users.

According to a study the total BaaS (Banking-as-a-Service) platform revenue will exceed $38 billion by 2027, rising from $11 billion in 2022. The rapid growth of 240% will be driven by BaaS’ ability to deepen relationships between brands and their customers by providing a user-friendly banking and payments experience. The research ranked Green Dot, Marqeta, and Solaris as the top three vendors.

Navanwita Bora Sachdev

Navanwita is the editor of The Tech Panda who also frequently publishes stories in news outlets such as The Indian Express, Entrepreneur India, and The Business Standard