For too long small and medium-sized enterprises (SMEs) have been limited in their growth by the constraints of mainstream banking and finance. But now all that has changed thanks to new advances in technology.
Among the biggest game-changers for these small businesses are FTTs, embedded finance and super apps. By providing firms with seamless, unfettered access to the customised financial products and services they need in order to prosper, they are enabling them to overcome significant barriers they have faced for years.
Embedded finance is the integration of a financial service into a business’s product, such as banking, payments, lending or insurance. These platforms are designed to be API-first and cloud-native, offering a wide range of capabilities that enable businesses to build and launch embedded finance solutions with speed and agility. Examples include buy now, pay later services, banking services within ride-sharing apps and payment processing services within ecommerce platforms.
Also read: How Wallester Aims to Revamp the FinTech Setup with Its Embedded Finance Technology.
Such is its recent growth, that the embedded finance market grossed $54 billion in 2022, according to Future Market Insights, and it’s projected to rise to $248bn in the next 10 years. As increasingly more new entrants join the space by the day and existing providers become ever-more innovative with their offerings, the sky is the limit.
Striking the right balance
One of the hardest balances for embedded finance providers to strike, however, is between scaling their offering, while at the same time maintaining the highest possible standard of customer experience. Focus too much on growth and the consumer is often overlooked, to their detriment, and vice-versa.
To achieve scale with their embedded finance product, first companies need to set ambitious yet obtainable growth targets. Then they need to set out a defined strategy for how to reach those goals.
That involves drawing up a budget and committing significant investment in the technology. The next step is to work with an expert technology partner to keep developing and building on the product so that it continues to improve and evolve to meet their customers’ needs.
This is achieved through constantly monitoring how effective the product is by looking at its usage and seeking customer feedback. Armed with that information, they then need to put that into action to achieve the best results.
The rise of super-apps
Another area that SMEs must capitalise on is super-apps. A super-app is a digital platform that provides multiple services, including payment and financial transaction processing, such as Alipay, Tencent’s WeChat and Grab.
These services can range from cashless and mobile payments, credit and loans to investment platforms and insurance. They even extend to QR code payments and rewards.
Companies can leverage their relationships with banks, external vendors and customers to optimise their super app. Based on customer insights and reviews, and drawing on banking and technology expertise, they can tailor their offering specifically to meet the end user’s needs.
A new wave of embedded finance
The next wave of embedded finance is already taking shape. It’s likely to focus on integrating complementary and niche financial products that build on the existing customer relationship and capitalise on the opportunity to cross or upsell, such as annuities, an insurance contract issued and distributed by financial institutions to pay out invested funds as a fixed income stream in the future.
Embedded finance 2.0 will likely be funded by a combination of banks, technology providers and startups. Working in collaboration, they can achieve far more than going it alone.
The future is already here and SMEs need to embrace it. With the technology at their disposal, they can turbocharge their growth through 2023 and beyond.
