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23 Jun 2022

How embedded finance empowers SMEs to innovate

It’s hard to understate the impact Uber has had on transportation. When it arrived on the scene it simply blew the competition away with a handy app that could find drivers, take bookings, and track rides all in one. Gone were the days of having to remember the number of a local taxi fleet or hoping the cash you had would cover whatever the fare turned out to be.

But Uber didn’t just change the way we get around town. It also brought a whole new model of “on-demand” services into mainstream use. It’s the same model behind food delivery apps like Deliveroo or shopping sites like Amazon, and it’s disrupting every industry it enters.

For each of those brands, the key to success has been a combination of an innovative offering and an unbeatable customer experience. But there’s another common denominator behind them – the embedded finance that makes them all possible.

Empowering ideas to happen

The bottom line with embedded finance is that it enables people to do things they wouldn’t otherwise be able to do. For innovators it brings the financial tools they need to get their ideas off the ground, and helps them to sidestep the obstacles that come with building everything themselves.

With financial services embedded into digital platforms, ideas that once seemed impossible are brought into reach. And that extends beyond the innovators creating the platforms too.

When Uber disrupted the taxi market, its lower fares and convenient booking system also made something possible for the end user. 

With a taxi to the airport now costing more like £40 instead of £90, and now that you can reliably book without having to ring around local firms, Uber has made taxi services more accessible than ever before. This is all thanks to seamless payments enabled by embedded finance – you pay, the driver’s paid and Uber makes its money all in the background.

That same expansion of possibility is unfolding in the world of marketplaces. With embedded finance, platforms for freelancers and content creators can help more people to start careers by guaranteeing income with flexible payment terms. 

Or in the real estate world, unbanked populations who might have been otherwise locked out of renting can find a home thanks to embedded finance, which can give innovators the ability to issue IBANs. Obtaining a bank account as a non-citizen has always been difficult – that is until some businesses added IBAN issuance to their offering, enabling people to skip the bank entirely.

Capture the market with a convenient consumer experience

For a product to truly disrupt the market, it doesn’t just need to be built on an innovative idea. The customer experience is just as important for a product to take hold and overtake its competitors. That’s the basis of product design methodology, and although embedded finance might seem like it has nothing to do with UX, the functionality it brings can help you achieve that.

Consider an app like Deliveroo or Just East. At their core they’re simply connecting hungry people to restaurants in their area. A kind of Gumtree for takeaways. What they’re selling isn’t so much food as convenience and connectivity – customers can now find a wide selection of food without trawling through dozens of individual websites, and restaurants can sell to a much larger market without needing to invest heavily in a digital presence.

Part of what makes their customer experience so convenient is embedded finance. Seamless payment flows and dedicated vendor accounts mean that restaurants and couriers are able to be paid instantly, while customers can get refunds quickly and directly from the restaurant if anything goes wrong. When there’s greater control over the movement of money, there’s more power for everyone involved.

Without embedded finance, transactions happen outside a business’ view. Where there should be an understanding of a customer’s spending, there’s a gaping hole. By contrast, with embedded finance your organisation can oversee the entire customer journey. You can oversee all the different parts of the chain working together and know what people are spending their money on, and use that insight to optimise or offer additional services. 

Embedded finance can also help boost the consumer experience simply by freeing up more of your resources. As a digital innovator you want to be focusing on your product – iterating your feature set, enriching the customer experience, and spreading the word. You don’t want to be consumed with compliance and the financial end of things. Both are of fundamental importance, but it’s better if there’s a solution that ticks these big boxes for you.

With an embedded finance plug-in, all of that functionality is provided and the red tape is taken care of. That means you can keep your focus exactly where it needs to be – on developing a great product for your customers.

Giving small businesses a global reach

When the burden of building a financial solution no longer sits on the shoulders of innovators, it opens up a wealth of possibilities for scaling – whether that’s offering new features, or expanding out to new territories.

For instance, that’s what Troc Circle do. They are a global invoice netting company that uses virtual card capabilities to manage the flow of payments to suppliers and receivables to businesses. With embedded financial plug-ins, they’re able to keep that flow going across borders and jurisdictions without needing to jump through regulatory hoops themselves.

Technically this would have been sort of possible without embedded finance, but doing so would mean incurring multiple fees from all those individual transactions, especially when cross-border payments are involved. It probably wouldn’t have been worth the almighty hassle. Troc Circle’s roadmap would have been an expensive, operational nightmare without a plug-and-play solution to make it fast, efficient, and more than a little viable. 

Even if embedded finance isn’t what makes an idea possible, it still opens up new paths that would otherwise take an age to trek around. Using a universal plug-and-play solution, innovators can tap into new markets without worrying about compliance for each new jurisdiction.

We’ll soon be expanding that even further into the US and beyond. With our Plug-and-Play Finance solution, all of our partners will be able to access that market without any heavy lifting. 

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Whether your offering is an application, marketplace or platform, if you’re looking to embed finance into your business, set up a meeting with one of our experts in your industry and request a demo today.

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