In the global financial services sector, embedded finance has emerged as the leading theme, with the sector being hailed as the next great wave in the Fintech industry. With the rising role of Fintech firms in the financial services market, coupled with the growing number of global firms tapping this route, the growth opportunity in the embedded finance sector remains huge. Today, businesses across industry verticals like logistics, insurance, grocery, manufacturing, and e-commerce are seeking to launch customized embedded financial products.
In this perspective, the opportunity for developing nations such as India remains very high. Over the last three to four years, India has emerged as one of the fastest-growing economies in digital adoption, and the global pandemic outbreak has further accelerated the trend. However, in terms of financial services penetration, India still has a long way to go compared to the global market. According to PayNXT360 estimates, insurance penetration rate remains less than 5% in the country.
However, this situation is quickly shifting. Insurance penetration is growing in the country, with several leading e-commerce platforms, such as Flipkart, offering embedded insurance products at the checkout. Notably, amid the growing embedded insurance traction among Indian consumers, more and more domestic e-commerce marketplaces are forging alliances with embedded insurance providers. For instance,
These strategic collaborations are expected to drive insurance penetration in the country over the next three to four years. Notably, the embedded finance sector in India has already been recording strong growth in India over the last few years due to the robust digital payment ecosystem. For instance,
With the adoption of the UPI payment method expected to grow significantly in Tier III and IV cities of India over the next three to four years, embedded payment solutions such as UPI are expected to drive financial inclusion in the country from the short to medium-term perspective.
Also, embedded lending options, such as buy now pay later (BNPL), is gaining widespread adoption among Indian consumers. These products are making it easier for consumers to avail of short-term loans directly from the merchant's website when making purchases online. Given the vibrant Fintech ecosystem and the well-regulated financial system in India, embedded finance is projected to drive financial inclusion at an accelerated pace over the next three to four years.
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