# The Role Embedded Finance Systems Will Play as Commerce Goes Increasingly Digital
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-10-10
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Embedded Finance: The Future of E-Commerce Growth
Meta Description: Discover how embedded finance is revolutionising online commerce, enabling seamless transactions and expanding financial services for businesses and consumers
URL: https://financedigest.com/the-role-embedded-finance-systems-will-play-as-commerce-goes-increasingly-digitalhtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-1065240778-1736815064391-compressed.jpg)

**![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/245-1736815064409-compressed.jpg)**

_By Martin Hegelund, [Ageras Group](https://ageras.group/)_

Consumers may be able to browse the aisles of brick-and-mortar businesses the way they could not do at the height of the pandemic, but that doesn’t mean e-commerce is going into a slump. In fact, it’s the opposite. Businesses and consumers alike have grown used to buying anything they want—and paying for it however they want—online. This is a trend that won’t reverse any time soon.

Embedded finance programs—or financial services offered alongside non-financial products and services—are becoming increasingly [important in digital](https://www.financedigest.com/42-of-retailers-say-payment-over-time-solutions-are-very-important-to-ensuring-future-digital-innovation.html "42% of retailers say payment-over-time solutions are ‘very important’ to ensuring future digital innovation") commerce. These programs accounted for nearly [5 percent](https://www.bain.com/insights/embedded-finance/) of all financial transactions in the U.S. last year, to the tune of $2.6 trillion, with that figure expected to exceed $7 trillion by 2026, according to research from Bain & Co.

The growth of embedded [finance is largely due to businesses](https://www.financedigest.com/1-in-3-uk-businesses-looking-for-finance-are-finding-it-harder-to-get-a-loan.html "1 in 3 UK businesses looking for finance are finding it harder to get a loan") of all kinds rushing to keep up with customer expectations and the various barriers-to-entry falling away. Businesses want to tap customers who don’t have [bank accounts](https://www.financedigest.com/new-legislation-makes-switching-bank-accounts-simples.html "New legislation makes switching bank accounts “simples”"), and those who do but prefer not to perform every financial transaction through their bank. And the cost of integrating embedded finance with existing [technology stacks has come down dramatically along with the time it takes to roll out services to the public](https://www.financedigest.com/why-its-time-to-centralise-public-sector-technology.html "Why it’s time to centralise public sector technology") or other businesses.

It all adds up to a steep growth curve for embedded [finance that might not reach a plateau for years](https://www.financedigest.com/2019-year-must-re-build-public-trust-finance.html "2019 is the year we must re-build public trust in finance"). So with this in mind, what’s [next for embedded finance](https://www.financedigest.com/finance-is-the-next-big-sector-to-be-ubered.html "Finance is the next big sector to be Uber’ed")?

**The Landscape**

Embedded fintech is ultimately all about transferring and storing money. For this reason, its original home was in [online marketplaces](https://www.financedigest.com/online-marketplaces-embracing-embedded-finance-to-benefit-both-customers-and-vendors.html "Online marketplaces: embracing embedded finance to benefit both customers and vendors     ") and business administration software. But new applications and use cases arise frequently. Here is a look at where this technology is adding value today, and the drivers that will help it to spread in the [years ahead:](https://www.financedigest.com/three-waves-of-fintech-disruption-leading-trends-for-the-year-ahead.html "Three waves of Fintech disruption: Leading trends for the year ahead")

**Payments:** Embedded finance programs have been reducing the friction that has long plagued online commerce, including the difficulty of cross-border transactions and the fees that major credit card companies charge buyers and sellers. When it comes to B2B use cases, international procurement and [trade will open up new possibilities for embedded finance](https://www.financedigest.com/ing-toughens-oil-and-gas-policy-to-include-trade-finance-midstream.html "ING toughens oil and gas policy to include trade finance, midstream"). In some cases, the seller will have negative working capital as they have to produce the goods. In other cases, a buyer will [need to finance](https://www.financedigest.com/7-finance-career-options-to-consider-and-what-you-need-to-know-about-each.html "7 Finance Career Options to Consider and What You Need to Know About Each") a large purchase. There are also issues in procurement and trade surrounding escrow, currency fluctuations, [insurance and international](https://www.financedigest.com/managing-trade-credit-and-insurance-in-the-context-of-international-commerce-expansion.html "Managing trade credit and insurance in the context of international commerce expansion ") transfer of money. A variety of industry incumbents and FinTech [startups are aiming](https://www.financedigest.com/british-ev-startup-arrival-gets-300-million-funding-aims-to-slow-cash-burn.html "British EV startup Arrival gets 0 million funding, aims to slow cash-burn") to create products and services to help with these matters – and embedded finance will have a major role to play.

**Lending:** Buy-Now-Pay-Later, which combines aspects of both payments and lending, is a newer model that has taken online [commerce by storm](https://www.financedigest.com/how-digital-commerce-merchants-can-weather-the-economic-storm.html "How Digital Commerce Merchants Can Weather the Economic Storm"). Globally, these transactions are projected to increase by more than [$450 billion](https://www.statista.com/statistics/1311122/global-bnpl-market-value-forecast/) by 2026. This follows the 400% growth BNPL saw from 2019 to 2021. Although regulators may be taking a closer look at BNPL programs, consumers have been [increasingly using them](https://www.forbes.com/sites/forbesfinancecouncil/2022/09/26/why-buy-now-pay-later-usage-is-changing-in-the-year-to-come/?sh=caf66de92673) as inflation rises. The spread of BNPL means the further spread of [embedded finance](https://www.financedigest.com/why-embedded-finance-will-be-integral-in-the-future-of-b2b-marketplaces.html "Why embedded finance will be integral in the future of B2B Marketplaces").

**Data harvesting:** An additional use case for embedded finance that is gaining steam are platforms that use a customer’s [financial data to deliver a service](https://www.financedigest.com/4-ways-high-performance-analytics-powers-financial-services.html "4 ways high-performance analytics powers financial services"). For example, some sites want to calculate a [consumer’s potential savings if they finance a certain product](https://www.financedigest.com/50-of-consumers-wont-spend-more-than-20-minutes-applying-for-financial-products-online.html "50% of consumers won’t spend more than 20 minutes applying for financial products online") or service. Other sites use credit [scoring](https://www.financedigest.com/12-things-that-dont-hurt-your-credit-score.html "12 Things That Don’t Hurt Your Credit Score") or credit verification, which enables the customer to utilize their own financial data for specific purposes.

**Cross-over:** Sometimes a vendor embeds regtech or InsurTech tools, which [deliver features adjacent to FinTech](https://www.financedigest.com/how-partnerships-fuel-fintech-innovation-and-help-banks-deliver-a-better-customer-experience.html "How Partnerships Fuel Fintech Innovation and Help Banks Deliver a Better Customer Experience"). Cross-over use cases will be another driver of embedded [finance systems](https://www.financedigest.com/from-fragmented-systems-to-unified-cpm-unicredit-prepares-for-todays-finance-challenges.html "FROM FRAGMENTED SYSTEMS TO UNIFIED CPM – UNICREDIT PREPARES FOR TODAY’S FINANCE CHALLENGES").

Embedded [finance as a category can be expected to thrive because businesses](https://www.financedigest.com/6-ways-to-spring-clean-your-business-finances.html "6 ways to Spring clean your business finances") of all kinds are looking to tie up less cash in their day-to-day operations. Embedded [finance offers companies certainty about when money](https://www.financedigest.com/student-finances-exposed-how-do-they-really-spend-their-money.html "Student finances exposed: How do they really spend their money?") is coming in from customers, and more flexibility regarding the money they pay out.

Many companies are integrating with BNPL providers and other [financial technologies to give their business—and their customers—the kind of flexibility that legacy financial institutions](https://www.financedigest.com/3-ways-financial-institutionscan-leverage-live-engagement-on-social-media.html "3 ways financial institutions can leverage Live Engagement on social media") do not. They are finding that new [financial technologies](https://www.financedigest.com/how-financial-services-companies-can-successfully-utilise-low-code-and-no-code-technologies.html "How financial services companies can successfully utilise low-code and no-code technologies"), including the embedded kind, are increasing sales, often while lowering transaction costs at the same time.

[Future innovation](https://www.financedigest.com/future-cheque-clearing-model-places-emphasis-on-speed-and-innovation.html "FUTURE CHEQUE CLEARING MODEL PLACES EMPHASIS ON SPEED AND INNOVATION") will largely be driven by businesses looking to simplify the transactions they do with other businesses. But even if B2B use cases are the leading edge for innovation, it is consumers who will ultimately benefit.

_Agera_


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---