Embedded finance refers to platforms through which online retail companies can offer lines of credit directly to their consumers. In the past couple of years, this form of financing has been booming in terms of popularity, with schemes such as buy now, pay later – also referred to as BNPL – taking off in a big way. In 2021, PayPal facilitated a 400% increase on BNPL transaction from the previous year – close to three-quarters of a million transactions in a single day. The embedded infographic looks at some more statistics for BNPL in the UK.
Jeremy Cole, Red Rose co-founder, works in finance and maintains a close eye on new fintech trends as they emerge. Embedded finance is one trend which looks set to develop further throughout 2022 and beyond.
Creating an Integrated Experience
As confidence in online payments increases, demand is on the rise for a more integrated experience when shopping or banking online. Embedded finance works towards the goal of meeting this demand, delivering a seamless shopping experience for the consumer which includes applying for and being accepted for credit to make larger purchases without ever having to switch to another website.
Research shows that consumers are increasingly flocking towards websites that are able to offer a seamless, integrated shopping experience which includes a facility to access credit for larger purchases.
The PDF attachment looks at how BNPL works from a consumer perspective.
Collaboration and B2B Growth
From a business perspective, the rise of embedded lending facilitates greater opportunities for B2B growth and encourages collaboration. Companies seeking to embed lending into their primary website are working closely with those platforms that enable them to do so, boosting opportunities for collaboration across a variety of sectors.
B2B lending in Europe alone is currently five times higher than B2C lending. With new platforms opening up, experts predict this will only expand throughout 2022. Embedded lending also generates opportunities to grow in parallel to the growth of their consumer base.
E-Commerce Funding
E-commerce platforms have become a viable source of funding for SMEs in all sectors, with platforms such as eBay offering affordable credit options to smaller businesses. Businesses are able not only to access alternative sources of funding, but also to access a wider range of credit products based on revenue. For many, this can mean faster access to credit on more affordable terms than with traditional lending.
A definition of e-commerce can be seen in the embedded short video.