Financial services firms are foreseeing substantial growth opportunities in the embedded finance space in 2023

Financial services firms are foreseeing substantial growth opportunities in the embedded finance space in 2023

Financial services firms are foreseeing substantial growth opportunities in the embedded finance space in 2023

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Many consumers have used embedded finance services globally in 2022 and the trend is projected to further grow over the next 12 months as more consumers seek to simplify their finances. To capitalize on the growing demand for embedded financial services, more and more financial services firms are foraying into the segment through merger and acquisition deals.

  • In February 2023, Zopa, the British financial services firm offering deposit accounts and other products, announced the acquisition of DivideBuy, a point-of-sale finance technology and lending platform. The acquisition of DivideBuy is part of the firm’s strategy to make a push in the embedded finance segment.

Emma, Swyft, Simba, and Nectar are among the many consumer brands that are served by DivideBuy. The addition of DivideBuy will enable Zopa to further bolster its current offering and gain market share in the point-of-sale segment.

Several merger and acquisition deals have taken place in the European embedded finance industry over the last few years. This also includes the acquisition of Contis by Solaris in July 2021. Following the acquisition, Solaris retired Contis in December 2022 and the German firm now operates under the name of Solaris.

  • The acquisition of Contis enabled Solaris to gain an e-money license in the United Kingdom, which is an addition to its existing EU licenses in Germany and Lithuania. On the other hand, Contis gained a foothold in the United Kingdom by merging with Solaris.

In the United Kingdom, the embedded finance segment has been growing at a record pace over the last few years. With many consumers using embedded finance services, even venture capital firms are betting their dollars on the market growth. Liberis, another United Kingdom-based finance provider, announced that the firm had received €30 million from venture debt provider Silicon Valley Bank UK in January 2023.

  • The machine-learning-powered software screens small and medium-sized enterprise (SME) applicants for loans and the service has been used by more than 23,000 SMEs, who have received nearly €1 billion in total liquidity. The solution has been also used by Klarna, the BNPL provider, to offer e-commerce financing in 17 countries.

Liberis has been growing its presence across Europe, including in Germany and Poland. The funding from Silicon Valley Bank UK will enable the firm to continue its expansion into new markets across the region and support embedded finance partners to offer more working capital loans to small businesses.

The demand for liquidity has been growing significantly among SMEs all over the world. Consequently, to serve the working capital needs of SMEs, many financial services providers are moving into the segment. In the United States, American Express launched Business Blueprint in January 2023.

  • The launch of Business Blueprint comes after the firm acquired Kabbage, the alternate lending startup in 2020. Furthermore, with the Business Blueprint launch, American Express has retired Kabbage.
  • With Business Blueprint, SMES can access a set of digital cash flow management tools.  Furthermore, SMEs can also access applications to select different financial products, including new lines of credit for growing their business.

With the launch of Business Blueprint, American Express aims to become the one-stop solution for all SMEs' financial needs. From helping businesses to make payments and get paid, to giving them working capital access, among other things, American Express is making a big push into the embedded finance sector. From the short to medium-term perspective, PayNXT360 expects the payments giants to launch more such services that cater specifically to the needs of small and medium-sized enterprises.

As the embedded finance market continues to offer robust growth opportunities to financial services providers around the world, PayNXT360 expects more and more firms to enter into the industry either through strategic collaborations or mergers and acquisition deals. This will further drive the competitive landscape in the global embedded finance space over the next three to four years.

To know more and gain a deeper understanding of the global embedded finance market, click here.

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