Embedded financial services has kicked off an exciting innovations race. Non-traditional financial services providers from Google to Ebay have acquired a significant market edge over their competitors by offering financial services within their online platforms, allowing customers to leverage a greater range of functionalities without ever leaving the brand.
The Key Benefits of Embedded Financial Services
The disruptive trend of embedded financial services is reshaping the financial services industry, increasing pressure on other financial service providers already struggling to differentiate themselves in a digitised economy that has little patience for slow, cumbersome, traditional processes.
A full suite of financial capabilities awaits ambitious businesses of all sizes, including digital payment accounts, cards, Faster Payments, Direct Debit transactions, Payment Initiation via open banking, Confirmation of Payee and 24/7 access and notifications (check out our Platform tab above to learn more). This collection of new services, enabled through APIs and it has the potential to transform financial services across industries, radically.
Non-financial service providers are launching products inspired and supported by FinTechs through API-enabled solutions. But what are the advantages of taking this approach? How can your business benefit from leveraging this dynamic new functionality?
- Create better customer experiences - by integrating disruptive features into your platform or on-demand service, you can focus on optimising the customer experience
- Offer wider choice and flexibility - by incorporating API-connected infrastructure, you can seamlessly improve your offering, faster than your competitors
- Provide new channels of financial service access for your customers
Good to know: While Modulr works with marketplaces that offer credit, those marketplaces do so under their own credit licence while Modulr only performs the operational payments side of the lending process including disbursements and collections. This is because we're an infrastructural payments platform and obtaining credit permissions, such as a banking licence, is not part of our business model.
When Every Service can be a Financial Service: Next-level Gig Economy Flexibility
Let’s take a look at one industry that digitised rapidly and is synonymous with gig economy flexibility: taxis.
Currently, drivers are financially dependent on the slow card payment rails that are used to collect the fare from passengers. The flow through from those fares can take several working days to transfer into their accounts or transferring directly to their own personal account. On top of this, and given that drivers usually sign up with several different competing services, it creates unnecessary friction between working and getting paid. It means drivers aren’t motivated to remain loyal to one company, costing platforms revenue.
Now let’s imagine a driver could be issued with say, an ‘Uber’ personal account (other drive platforms are available!) which is enabled with multiple financial services relating to payments. Immediately, drivers would be able to benefit from the following:
- Instant access to earnings
- Direct spend of wages via company-issued, prepaid cards
- New financial products and services
- Personal account functionalities - bill payments, money transfers and more
The company, meanwhile, would benefit from:
- Immediate, significant brand differentiation
- Sustained loyalty of drivers
- Acquiring invaluable transactional data - enabling the company to tailor and release financial product offerings
It’s easy to see how this can apply to all manner of gig economy services. Deliveroo, Door Dash and Just Eat are prime examples of companies that feature similarly compelling use cases, ripe for embedded payments innovation.
But it isn’t just the gig economy and its flexibility that stands to benefit from embedded payments applications. Online marketplaces can also leverage APIs in payments to strengthen their businesses.
How Marketplaces Benefit from embedded payment APIs
Although there is greater differentiation between online marketplaces than with App-based taxi services, the experiences for merchants remain incredibly similar. Selling items through eBay or Etsy won’t get you paid quicker than if you’d used Amazon or the many other marketplaces on the web.
But if we apply embedded payments thinking to marketplaces, suddenly, merchants have a lot more incentive to stick to one platform over another, thus providing greater choice and affordability to the marketplace's buyers. Embedded payment APIs would permit merchants to benefit from complete control over their finances, including:
- Quick access to manage funds and balances
- Immediately spend earned sales with a prepaid business card
- Digital payments account functionality as an alternative to a bank account - allowing merchants to managing their finances, pay bills and transfer funds.
Similarly, marketplaces benefit from being able to:
- Enhance payments journeys, adding split payments functionality or tip collection
- Create new revenue streams to differentiate platforms from competitors
- Gain valuable insights into merchant behaviour and financial activity - facilitating the creation of optimised financial services for merchants.
So, how can on-demand platforms and marketplaces quickly enable embedded financial services into their businesses? It’s essential to partner with a reliable API payments platform, like Modulr, that understands the scope of the opportunity of these new financial services.
Realising the Full Potential of Embedded Financial Services
For innovative online companies to effectively leverage the multitude of opportunities presented by embedded financial services, they must partner with flexible platforms that can supply dynamic APIs. Marketplaces and gig economy platforms can then unlock innovative solutions for their customers, strengthening their competitive position whilst improving their customer service.
Modulr’s platform is designed to achieve just that. With embedded payments infrastructure, your business can reduce cost, acquire new customers, and more reliably control and automate treasury management for efficient cash flow.
Modulr helps marketplaces and on-demand platforms install innovative and secure payment services that provide an unbeatable competitive edge for customers. We help you unlock operational efficiencies and eliminate processes that could hold you back.
Glossary of Key Terms
Embedded financial services: This refers to software that can be embedded in an organisation's own infrastructure to operate and offer financial services to customers and suppliers. It allows for greater control, reliability and speed than traditionally reselling third party financial services while it also keeps customers in the brand experience.
Embedded Finance: Embedded finance technically refers to any credit or lending offering that can be embedded as a checkout option such as selling cars on finance. While Modulr works with marketplaces that offer credit, those marketplaces do so under their own credit licence while Modulr only performs the operational payments side of the lending process including disbursements and collections.
Platforms: This is infrastructural software on which users can build solutions to perform specific functions.
Payments and Banking-as-a-Service: This is software that enables users to perform financial activities which would otherwise most likely need to be facilitated by a bank. While Modulr is not a bank, we provide payments and banking-as-a-service software as an alternative to traditional banking infrastructure.
API: (Application Programming Interface) A connector between software that enables the creation of new services or digital products.
Online Marketplace: Any online website or app that allows merchants to sell items to customers, such as eComm or delivery.
On-demand platform: Any online website or app that lets individuals earn money from on-demand tasks, such as taxi driving or fruit picking.