In a move to make financial interaction simple for customers, financial services now come bundled into non-financial platforms online, called “embedded finance.” This is not a new concept. It has played an important part in the growth of India’s online businesses for some time. Most platforms that demonstrate this well are direct-to-consumer (D2C) and business-to-consumer (B2C) platforms. Once you open any app on your phone, whether it’s fashion, food, bill payment, or astrology, you have a wide range of payment options at the checkout. You could make payments through UPI, wallets, net banking, or even opt for EMI and Pay Later options.
In the last few years, there has been a big surge in the digital wave with consumer credit in India going digital, which has moved from paper applications to quick online loans. Consumers can now just get loans with a click, and the money arrives almost instantly or within a day. They do not have to wait for loan approvals any longer.
Owing to new technologies, consumer financial services have undergone massive change, and the next big disruptor is said to be “embedded finance.” This essentially means merging financial services into non-financial platforms, enhancing user experience. For instance, while doing online shopping, you might use contactless payments, or digital wallets, or even convert your spending into equated monthly installments (EMIs)
Embedded finance is mainly driven by two key factors- the increasing use of open banking and the rise of banking as a service (BaaS). It includes features such as digital wallets, online banking for payments, EMI financing, buy now pay later (BNPL) for lending, and also insurance and wealth management. They create an ecosystem that enhances customer interaction and experience.
The Indian embedded finance industry is set to grow at a CAGR of 30.4 per cent and will reach $21,127.5 million by 2029, according to Research and Markets.
According to experts, embedded finance helps every stakeholder involved in an ecosystem- digital platforms, financial service providers, and embedded finance fintechs.
How Does It Benefit Schools: Embedded finance benefits schools by easily handling their finances, securely processing payments, and keeping digital records. This helps create a well-arranged financial system that supports the Digital India initiative and reduces administrative work for educational institutions. As students are fast picking up cashless transactions, they are fast learning important financial skills. Armed with digital skills early on in life, they have become adept at budgeting, tracking expenses, and making secure transactions.
