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Exploring the true cost of not embedding finance

Exploring the true cost of not embedding finance


Scott Frisby, Head of Strategy at Elavon in Europe.

With consumers increasingly choosing digital transactions, the embedded finance market has a central role to play in meeting a growing need for convenient and integrated financial services across different industries. Unsurprisingly, the market is booming – expected to reach more than $730 billion by 2032.

Whether they’re shopping in stores, at home, or on the go, end customers now expect to be able to make payments wherever, however, and whenever it suits them. 

In order to attract and retain customers – and unlock new efficiencies in their business models – forward-looking companies must consider how they can engage with the opportunities presented by the embedded finance revolution. It offers a range of benefits they can’t afford to miss out on.

Supercharging business growth

Embedding payments and other financial services into merchant and consumer platforms has helped to further monetise environments that may have previously lacked revenue opportunities for outside businesses. 

Just look at social media platforms, and how traditional retail models have changed to enable merchants to meet their customers where they want to spend their money. 

Enabling small business owners in particular to take faster, simpler payments to meet the changing needs of their customers – and, ultimately, get paid themselves in a more efficient manner – is critical to their business growth prospects. 

Partnerships are fundamental to providing businesses with the necessary tools to grow. We recently teamed up with Softpay to offer a new SoftPOS payment solution, which allows merchants across Europe to turn any Android mobile device into a card-present payments terminal by simply downloading an app with all the security of a traditional payments terminal. This solution enables small and new businesses to start taking payments instantly, giving owners more time to focus on the actual running of their business. 

As with the opening up of offering any financial products, ensuring compliance with regulation will be a challenge as embedded finance continues to develop. There’s also an element of trust, and giving consumers the confidence to use these embedded products and services. Responsible providers will need to make sure they are educating consumers along the way.  

Exploiting the latest innovations 

Embedded finance is essentially leveraging the convergence of technology and payments innovation to enhance customer experience. 

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This can help to shift the dial for individual businesses, but also entire industries. One area to watch closely is voice-driven technology, which is everywhere now – on people’s phones, in their homes, and in their cars. People are familiar and comfortable with it, so it makes sense that it will now be used to transform common hospitality experiences into customised premium experiences. 

We’ve been working with The Digital Line (TDL) to roll out voice-activated payments solutions across racecourses, hotels, and stadiums. Using Amazon Alexa devices, these solutions convert audible commands to card-not-present (CNP) transactions, with payments made using a pre-determined account preference, such as a credit card. 

This will give businesses a sharper competitive edge by reducing friction and offering their customers a simple yet innovative payments solution that’s leading to higher average spend per order, reduced waiting times for customers, increased operational efficiencies, and increased customer satisfaction. 

Voice-driven services will soon become commonplace in the hospitality sector, with initial use cases showing a 15% increase in customer satisfaction and a 70% increase in operational efficiency. 


Getting prepared for a smarter future

When it comes to embedded finance, we’re still only seeing the tip of the iceberg. In the coming years, we’ll see much more growth in the types of embedded finance products being offered, and where you’ll see them offered.

For example, integrating payments solutions in communication platforms, such as Microsoft Teams, will allow professional services providers – like career coaches, therapists, and language teachers – to deliver services over a conference call and arrange payment simultaneously within the same environment. This improves customer experience, but also lowers the cost to market for sole traders and small businesses, allowing them to reach a wider geographical spread of customers. 

Embedded finance also underpins the growing shift towards smarter cities, which will use facial recognition and embedded digital payments to charge consumers without having to disturb the user. We may soon all be living in a city where payments are embedded within experiences and municipal services: restaurant bills, commuter fares, and retail shopping – all paid for automatically. 

To remain relevant and future proof their business, merchants from across all sectors need to adapt their business models to exploit embedded finance. It’s simply too costly to ignore, given embedded finance’s rapidly widening footprint. It’s key to unlocking customer acquisition, boosting customer satisfaction, and ensuring success in new markets. 

For payment service providers (PSPs), this could mean selling software upfront with embedded payments to merchants alongside other embedded finance products, such as loans, VAT services, and currency services. The result is that PSPs will become more deeply involved in the consumer-facing angle than ever before, from shopping apps and integrating loyalty, to cross-sales enhancements and click & collect. 

This is the future, and we all need to adapt to reap the benefits. 

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