Survey Predicts 215% Global Growth for Embedded Finance in 5 Years

Fazzaco has covered a number of stories on embedded finance related fundraising since the beginning of 2022. As an emerging branch of fintech, embedded finance is essentially a way to embed banking services into the products and services of non-financial institutions.

With numerous challenger banks opening up a brand new, and distributed vista for the finance markets, the rise of embedded finance appears to be turning the ongoing financial revolution to a new chapter.   

A Fazzaco Log of Embedded Finance Stories Since 2022

Ant Money, an embedded finance platform, has announced that it secured 20 million USD in its A-round as early as the end of 2021. In January, Responsible, creators of the world's first embedded finance platform in fashion, announced it has raised a $6.6 million Seed Round of investment capital, led by Barclay. Indian embedded finance firm M2P has raised $56 million in the same month​. In February, the UK-based startup Weavr closed a $40 million Series A funding round led by Tiger Global. In May, embedded payments specialist Infinicept raised $23 million​ in a growth equity round. Moreover, multiple embedded finance firms carried out mergers and acquisitions to expand globally. E.g., in June, Colendi, a growing embedded fintech services platform announced its acquisition of London-based blockchain settlements and payments provider SETL. In July, BankiFi, an embedded banking solutions provider, announced its expansion into North America with the launch of BankiFi Americas​.

Why is Embedded Finance Revolutionary?

For a long time, financial services were concentrated on financial institutions like banks. With embedded finance, however, non-financial institutions are now enabled to provide similar services. Hence a more decentralized network where not only consumers' needs are addressed swiftly, but users are allowed to experience financial services in full in various scenarios with technologies like API in today's mobile era.

According Accenture, a U.S-based IT consultancy, which did a survey on a hundred non-financial firms recently, 47% of the respondents showed interest in investing in or introducing embedded finance; moreover, 85% of the respondents believed that the service may significantly help a business attract new users.

It is expected that embedded finance will see a drastic global growth of 215% in the next five years, while its provision depends on whether a service provider can offer available APIs. Easy API integration lowers the obstacle to access financial services, and creates substantial and new profitability potential for fintechs that provide embedded finance.

A Variety of Scenarios

The first is of course embedded payment, which can greatly facilitate users and merchants, especially for online brokers, allowing investors to deposit funds in a more convenient way, which is the concept of PaaS (payment as a service) mentioned by many industry players.

In addition, the now very popular Buy Now Pay Later (BNPL) is also a use scenario of embedded services - that is, embedded loans, which allow buyers to use installment payment services directly without visiting banks or other financial institutions. .

In addition, insurance is another scenario for embedded services. Especially nowadays, when we buy tickets on the mobile phone for travel, we can usually buy bundle insurance directly, which is also a typical use scenario.

Let Every Company Be A Fintech

With the API technology mentioned above and BaaS (Banking as a Service), almost any company can launch similar financial services. Here's a quote from Angela Strange, a partner at Andreessen Horowitz, an American VC, she said "every company will be a fintech", and that perfectly explains what embedded finance is about: enabling companies in every line of business to integrate financial business, and maybe even launch new concept financial products to expand their existing revenue.

Of course, we must also be soberly aware that embedded finance does not currently pose too much threat to the dominance of financial institutions such as major banks. After all, they still lack the scale, government support, and huge cash flow that large banks have.