Where is Embedded Finance Heading in 2023?

As we have learned, embedded finance refers to the integration of financial services into non-financial products and services, such as retail websites, mobile apps, and even physical products. In other words, it is the process of making financial services more accessible and convenient for consumers by embedding them into the products and services they already use.

Over the past few years, we have seen a significant increase in the adoption of embedded finance, and this trend is expected to continue in the coming years. In this article, we will explore some of the key trends and developments in the world of embedded finance and try to predict where it is heading in 2023.

1. Neobanks

One of the most significant trends in the world of embedded finance is the rise of neobanks and digital-only banks. Neobanks are financial institutions that operate entirely online, offering a range of financial services such as checking and savings accounts, loans, and investment products. They do not have any physical branches and rely on digital channels for customer acquisition and service delivery.

Digital-only banks have seen significant growth in recent years, and this trend is expected to continue in the coming years. According to a report by the Boston Consulting Group, the number of neobanks worldwide is expected to triple by 2023, reaching over 300 million customers.

One of the main advantages of neobanks is their ability to offer a more seamless and convenient banking experience for consumers. They often have user-friendly mobile apps that allow customers to access a range of financial services from their smartphones, and they also offer attractive rates and fees.

2. Fintech x Banks Partnerships

Another trend in the world of embedded finance is the rise of fintech companies that offer financial services through partnerships with traditional financial institutions. These companies use technology to streamline and automate financial processes, making it easier for consumers to access financial services.

Fintech companies are increasingly partnering with banks and other financial institutions to offer a range of financial services, including payment processing, lending, and wealth management. These partnerships allow traditional financial institutions to tap into the technology and innovation of fintech companies, while also giving fintech companies access to a larger customer base.

3. E-commerce

One area of embedded finance that is expected to see significant growth in the coming years is the use of financial services in e-commerce. As more and more people turn to online shopping, retailers are looking for ways to make the process easier and more convenient for their customers.

One way that retailers are doing this is by integrating financial services into their online stores. For example, some retailers are offering financing options for customers who want to make a large purchase but don't have the cash upfront. Other retailers are integrating payment processing into their websites, allowing customers to pay with their preferred payment method.

4. Sharing Economy

Another trend in the world of embedded finance is the use of financial services in the sharing economy. The sharing economy refers to the growing trend of people using technology to share resources, such as cars, homes, and even tools and equipment.

Financial services are becoming increasingly important in the sharing economy, as they allow people to easily and securely pay for the resources they are using. For example, ride-sharing platforms like Uber and Lyft use payment processing to allow riders to pay for their rides, and home-sharing platforms like Airbnb use payment processing to facilitate the payment of rentals.

In conclusion, the world of embedded finance is constantly evolving, and we can expect to see significant growth and innovation in the coming years. Neobanks and digital-only banks are expected to continue their rapid growth, and fintech companies are expected to play an increasingly important role in the financial industry. The use of financial services in e-commerce and the sharing economy is also expected to continue to grow, making it easier and more convenient for people to access.