Embedded Finance: co-creating seamless experiences and customer value
By Kian Jackson, General Manager – Merchant Acquiring at Novatti
More than ever, consumers are demanding faster services and more seamless experiences in the digital era. These days, consumers tap their card or phone to buy groceries, pay for bills online and go shopping within social media apps. All of these experiences that are so effortlessly integrated into our everyday lives continue to drive the ‘embedded finance’ phenomenon.
The power of embedded finance is its ability to allow businesses, especially non-financial ones, to quickly launch financial offerings to market through ‘plug and play’ solutions. Ultimately, this enables merchants to create a frictionless experience that is embedded in the brand that they already know and trust.
Merchants who offer embedded finance include retailers, online marketplaces, utilities, educational institutions and professional services. Some of the key benefits include:
- Reduce transaction costs with lower fees compared to traditional financial institutions as well as faster transaction speed.
- Reach a broader audience and gain new customers by providing customers greater accessibility to financial services. Merchants can also launch new offerings or cross-sell other products and services.
- Increased operational efficiency due to merchants being able to manage their financial operations within the same platform they use to manage their business.
- Increased customer retention with enhanced experience and the ability to offer loyalty programs and incentives.
- Data-driven insights on customers’ financial behaviours, which can be used to inform product development, marketing, and customer service teams.
It is not surprising then to see companies make the switch from legacy technology stack to the embedded finance solutions that boasts enhanced customer experience and streamline payment processing. Companies are also able to gain valuable consumer behaviour insights and capture revenue from payment processing fees.
One of the earliest and most famous examples of embedded finance is Uber’s payments process, which automatically charges the customer’s fare and pays the driver when they arrive at the destination. Since then, we have witnessed an ‘uberisation’ effect with new platforms and marketplaces across various industries.
Embedded finance market in APAC
Asia-Pacific is one of the fastest growing regions in adopting embedded finance, with an estimated CAGR of 29.4% from 2022 to 2029. Shaped by consumer purchasing behaviour changes post pandemic, the proliferation of fintechs to regulatory support of innovation, new ecosystems and business models have since then emerged into the mainstream.
Some of the ways in which embedded finance is taking place includes:
- Non-financial companies across all sectors partnering with financial institutions to create value add for their products and services. Financial institutions then apply embedded fintech (payments, lending and insurance) as part of their core offering.
- Non-financial companies integrating directly with embedded finance providers and bypass traditional financial institutions. These providers can include Banking-as-a-Service, Card Issuers, Merchant Acquirers and Payment Orchestration Platforms which act as a one-stop shop for all payment processes.
Novatti’s embedded finance in action
Novatti’s integration with Reckon (or Reckon Payments) offers a range of benefits for businesses, including improved cash flow, increased security, and enhanced customer experience. By streamlining payment processes and integrating with the Reckon One accounting software, Reckon Payments can help businesses manage their finances more efficiently and focus on growing their business.
Traditionally invoicing has been a manual process with a total of 11 steps from creating an invoice through to sending it out via multiple third party platforms. Since integration, invoice management has been simplified to three steps, with things like notifications, reminders and auto-reconciliations now automated. Reckon users can offer their customers a wide range of payment options through a branded custom-hosted payment page accessed via PayByLink or QR code.
We are exploring more payment integration opportunities in our partnership with Reckon’s 117,000+ cloud-based users with payment automation and digital cards as potential future solutions.
Should you consider embedded finance for your business?
If you are a company that prioritises customer retention and loyalty, or wants to unlock new revenue streams, then the answer is yes.
Embedded finance gives companies a competitive edge to offer more relevant financial services to their customers, boost customer lifetime value and drive future growth.
If you are a customer-facing brand or a startup looking to innovate, it’s time to stay ahead of the game by thinking about how your products or services can benefit from an embedded finance approach.
To learn more about how Novatti can help you achieve these goals for your business, get in touch with us at [email protected]
Disclosure: At the time of publishing, Australian FinTech Pty Ltd is a shareholder of Novatti Group Limited.
