Embedded finance/financing is the new buzzword in both the financial and technology worlds. Before taking a look at the basics of embedded financing, we must understand the difference between the terms embedded finance and embedded financing.
The terms “embedded finance” and “embedded financing” are often used interchangeably, but their meanings can be slightly different.
Embedded finance refers to the integration of financial services and solutions into non-financial platforms or businesses using technology. It involves directly incorporating financial products, processes, or capabilities into the customer experience of another company’s products or services. Embedded finance enables businesses to offer financial services seamlessly, simplifying transactions and enhancing customer convenience. It focuses on the broader concept of integrating financial services within various industries and platforms.
Embedded financing specifically refers to the integration of financing options or solutions into non-financial platforms, systems, or transactions. It involves incorporating financing features, such as loans, credit facilities, or invoice financing, into the customer experience of another business or platform. Embedded financing allows businesses to provide immediate access to funds or financing options, simplifying the financial aspects of transactions for their customers. It is a subset or specific application of embedded finance that revolves around incorporating financing solutions into existing platforms or processes.
Here are a few examples of embedded financing:
Many e-commerce platforms offer embedded financing solutions at the point of sale. Customers can choose to finance their purchases through installment plans or buy now, pay later (BNPL) options directly on the platform.
Some ride-sharing and food delivery apps have integrated embedded financing options. They provide their drivers or delivery partners with access to instant earnings, cash advances, or vehicle financing services, all within the app.
Real estate platforms may offer embedded financing services, allowing potential homebuyers to pre-qualify for mortgages, estimate loan terms, or explore financing options directly on the platform.
Some SaaS providers offer embedded financing to their business customers. They may provide subscription-based software services with financing options or flexible payment plans to help businesses manage their cash flow.
Online education platforms sometimes offer embedded financing options to make education more accessible. Students can directly access loans or installment plans through the platform to finance their courses or degrees.
Travel booking websites or apps may offer embedded financing solutions for travel expenses. Customers can opt for travel loans or installment plans to manage the costs of flights, accommodation, or vacation packages.
Embedded invoice financing provides a seamless and integrated way to get cash on the invoices that are receivable at some future point in time. Embedded invoice financing offers businesses a way to maintain their cash flow more effectively. This way they can increase their productivity to multifold. Embedded invoice financing can be integrated into a number of software solutions.
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The unique KYI (Know Your Invoice) service by InvoiceMate provides real-time invoice verification, credit scoring, and risk profiling. This way it offloads the financing institutions from tedious due diligence.
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Embedded financing aims to enhance customer experiences, increase conversion rates, and drive business growth by providing convenient and tailored financing options within the existing customer journey. It simplifies the financing process and expands financial inclusion by making financing more accessible to a wider range of customers.