Strategic alliances aiding innovation and growth in the global embedded finance sector in 2023

Print

Email

Much of the innovation and growth in the global fintech sector has been led by strategic partnerships between firms. From buy now pay later to alternate lending, alliances have resulted in new product launches and accelerated growth for the overall market. Embedded finance is no different. Firms, including payment giants like Visa and Mastercard, have entered into a strategic collaboration to launch new products and services, which has subsequently aided the industry's growth.

The trend has further continued in the global market in H2 2023, with fintech firms seeking to boost their embedded finance product offering from the short to medium-term perspective. For instance,

• HSBC, in August 2023, entered into a strategic collaboration with a B2B-focused fintech firm Tradeshift. As part of the alliance, the two firms are launching a joint venture to develop embedded finance solutions and financial services apps. The collaboration will see an investment of US$35 million from HSBC into Tradeshift in two parts. In its funding round, which also includes the investment from HSBC, Tradeshift is expected to raise nearly US$70 million.

Tradeshift is planning to utilize the capital for expanding its global commerce network, and will also be investing significantly in the development of technology. The development of embedded finance solutions, in partnership with HSBC, is expected to be deployed across Tradeshift and other platforms. The collaborative project will encompass integrating payment and fintech services directly into the marketplace, trade, and e-commerce processes to enhance the overall customer experience.

In another strategic collaboration, Treasury Prime, one of the leading embedded banking firms, partnered with Academy Bank in July 2023. The alliance will offer embedded financial services to customers in the finance sector. The partnership comes at a time when the demand for embedded finance services has been on the rise globally.

• The primary objective of this partnership is to facilitate seamless access to Academy Bank's deposit services, enabling businesses to provide FDIC-insured accounts to their customers while adhering to regulatory requirements. By leveraging Treasury Prime's renowned BaaS platform alongside Academy Bank's robust banking infrastructure, businesses will have the capacity to efficiently introduce and grow their payment and deposit offerings, leading to enhanced customer engagement and retention.

In India, too, the embedded finance space has been growing significantly on the back of strategic collaborations over the last 12 months and the trend has further continued in H2 2023. FinBox, the fintech firm in the digital lending space, entered into a strategic collaboration with Housing.com in July 2023. The embedded finance infrastructure will enable Housing.com to offer loans through its app. Customers will be able to borrow up to INR 1 million on the platform.

In the Philippines, Netbank, the Filipino embedded finance platform, entered into a strategic collaboration with payments firm Pays0 in July 2023. The alliance is expected to aid the growth of both firms from the short to medium-term perspective, as the Filipino payments market is poised for accelerated growth on the back of the rapidly expanding digital economy and increasing adoption of e-commerce.

Furthermore, a large chunk of the 110 million population still falls under the unbanked category in the Philippines. This represents a significant growth opportunity for Netbank and Pays0. The payments infrastructure of Netbank will enable the firm to leverage the growth opportunity in the sector while empowering individuals and businesses to access financial services.

The collaboration between AAZZUR and Thinslices also aims to boost the embedded finance offering. Through this partnership, AAZZUR's all-encompassing tech stack and Thinslices' proficiency in digital product development come together to offer seamless embedded finance integrations, eliminating the necessity for internal teams. For AAZZUR, the alliance will lead to reduced costs and faster market time for non-fintech firms.

Going forward, PayNXT360 expects more such strategic collaborations to emerge in the global embedded finance market. Furthermore, PayNXT360 also expects higher venture capital and private equity funding to enter the market over the next three to four years, as demand for such solutions continues to grow. All of these factors will keep aiding innovation and industry growth from the short to medium-term perspective.

Based on PayNXT360’s estimates, the global embedded finance market is projected to grow at a compound annual growth rate (CAGR) of 28.5% from 2023 to 2029, during which the market will increase from US$267.5 billion in 2023 to reach US$862.1 billion by 2029. In 2023, alone, the global market is expected to grow by 39.4% on an annual basis.

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