In a hyper-competitive world, traditional businesses have increasingly integrated with embedded finance offerings to stay in business. In order to provide the clients with better functionality, optionality, and flexibility, financial technology platforms are also investing in API-based platforms. For instance,
Acquiring Payrailz allows Jack Henry to better support banks and credit unions to compete with industry disruptors and, thus, meet the growing needs of consumer and commercial account holders. Moreover, this acquisition also helps to enhance Jack Henry's payments-as-a-service (PaaS) strategy, which enables open banking together with embedded finance abilities and embedded fintech operations. Therefore, the platform adopted this strategy to cement the connections between individuals and financial institutions through technology and services to see growth in its business over the long run.
Similarly, retail banking platforms are expanding their embedded banking solutions to attract more software companies to own and process payments easily. For instance,
Merchant commerce platforms are also diving into the embedded finance space to capture market share. For instance,
Last year, Pine Labs plunged into the online payments space through its launch of Plural, advanced technology of embedded payments consisting of three key products, namely Plural Gateway, Plural Checkout, and Plural Console, to elevate the online commerce experience. Consequently, the platform strategized to merge the embedded finance and payments space to capture more market share. Specifically, the platform aims to build an infrastructure for open banking and open API and thus, the combination between Plural and Setu is expected to be very powerful for the company. Pine Labs, which deals with payment volumes of about INR 2,000 crores (US$254 million) per month through Plural, is expected to attract increased business post this acquisition.
Notably, Bengaluru-based Setu saw strong demand for its products across diverse industry verticals such as start-ups, retail enterprises, insurance, banks, and lending companies. This strong demand is also backed by the golden phase of digitization in India, where their work on UPI and the account aggregator space saw fast adoption. Setu's work on Aadhaar eSign to BBPS bill payment, payment collection integration via WhatsApp, FASTag payment collection and more are some of the above-mentioned cases.
Consequently, it is expected that Pine Labs' network of merchants and issuers, together with the power of API, will help achieve significant goals in personal finance management, credit underwriting, monitoring loans to predict default rates and several other areas.
On the other hand, embedded finance has proved immensely beneficial for e-commerce businesses, creating immense opportunities for small firms where the technology helps to modernize the financial processes. Therefore, embedded finance and e-commerce are seen to get merged for easier access for SMEs to receive capital, receive credit, and other financial services that they require, to drive growth. For instance,
Embedded finance is witnessed to boom, particularly in the Southeast Asia region, where the maximum population is underbanked or unbanked. While more than 80% of transactions in the region are made through e-commerce, SMEs need assistance, especially for supply chain financing. This opened a wide opportunity for embedded finance to flourish, where SMEs now can pay vendors overseas, and other services needed to run a business all without using a card. Therefore, e-commerce and embedded firms are forging alliances, creating numerous growth possibilities and promoting further innovation.
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