If you’ve been paying attention to the tech world, you’ve probably seen “fintech” emerging as a household buzzword. Fintech (short for “financial technology”) is focused on improving the ways in which financial services are delivered, which clearly impacts anyone who shops… well, ever.
But PH posits that the next big thing isn’t just fintech on its own – it’s “embedded” fintech.
According to Forbes, embedded fintech is any technology that “help[s] financial institutions integrate money management services into their existing offerings.” An example of this philosophy in motion is GradJoy, a service that consolidates all of one’s existing student loans into one app and pushes payments from that app to the respective loan providers.
Another example might entail a payment portal including the option to finance a purchase with a third-party service rather than paying all at once. Amazon and Apple both do this in different scenarios.
Embedded fintech is often conflated with embedded finance, but there’s a difference. Forbes defines embedded finance as “[enabling] non-financial services companies to provide banking services,” which comprises things like Uber and Lyft – two services that, despite not being financial institutions on their own, do process payments in their respective apps.
Stripe is also an example of embedded finance insofar as it is used to process payments for non-financial institutions across the Internet and brick-and-mortar locations alike.
All of this begs the question: Why is embedded fintech so important right now?
The answer lies in consumer autonomy. Revenue estimates of $230 billion from all embedded finance options (including fintech) is predicted by 2025, which is over 10 times the revenue generated by similar technology in 2010.
That number certainly isn’t an accident. Consumers tend to do well when they’re in the proverbial driver’s seat, and fintech makes cruising easy; in that ecosystem, spending money (and generating revenue via embedded fintech) comes naturally.
The next stage of embedded fintech will actually focus on procurement, furthering consumers’ use of (and benefits from) this kind of technology.
If you haven’t yet jumped on obsessing over fintech, or you’ve written it off as unimportant in your business, now would be a good time to look at how this trend may impact your business and/or consumers.