By James Caunt and Medb Kiely-Cuddy · Authors at Blockmate.io
The last few years have seen exciting new trends emerge in embedded finance. From the increasing popularity of banking-as-a-service and barrier-breaking fintech partnerships to the growing demand for personalized financial products and services, the embedded finance market is seeing constant evolution and growth.
The current driver of innovation in the sector is, without a doubt, the integration of Web3. Embedded finance and Web3 are natural partners in many ways, with the quick, secure connection of crypto wallets to blockchain protocols such as DeFi and NFTs meshing perfectly with the core ideas of instant access to loans, investments, and other financial services.
So how can you tap into Web3-driven embedded finance to grow your user base and revenue? In this article, we’ll check out the ways fintechs are doing just that. We’ll also discuss some easy ways to get Web3 wallets connected to your website or app so you can get started right away.
But first, let’s look at a few reasons why embedded finance is the place to be right now.
Why embedded finance?
Embedded finance lies at the intersection of finance, tech, and commerce. It provides the financial services required to streamline the customer journey with seamless integration into the platform or company they’re using. It’s about meeting the customer where they are, not expecting them to come to you.
Think things like branded credit cards, “Buy Now, Pay Later” options at eCommerce checkout points, integrated insurance, fintech-as-a-service, embedded investment, payment options, and much more. These services can be offered as part of the customer experience without the need for any third-party involvement.
Benefits of embedded finance include:
Onboarding: Onboarding users can be pain-free even with the need for financial information. Users can easily connect or link their accounts in a few moments, all in-app.
Improved UX: Embedded finance streamlines the entire customer journey, increasing touch points and reducing pain points.
Keep customers on your platform or app: With embedded finance, customers never have to navigate away or leave your site to complete a purchase, invest, etc.
Personalized experiences: With a wealth of financial data at your fingertips, embedded finance allows you to make tailored suggestions or services available to each customer, including investment options.
As embedded finance becomes more a part of our everyday lives, the fintechs that can help companies to implement into their services will be in high demand.
How fintechs are leveraging Web3 for embedded finance
Lending
Crypto lending has been a major component of Decentralized Finance since its inception and a natural fit for the emergent embedded lending market. Fintechs like Salt now offer crypto BNPL and short-term crypto lending options that can be embedded into existing services.
One of the hurdles to crypto BNPL services has been the difficulty in determining a credit score. However, new Web3 API platforms like Blockmate can now provide automatic risk scoring, helping lenders to determine and reduce risk.
Web3 analytics allows fintechs to link crypto wallets to real-life users and discover their balance, transaction behavior, investment portfolio, and more. With this data, it’s now possible to build effective Web3 credit scoring and BNPL services. This unlocks the crypto lending market for embedded finance and provides a great opportunity for fintechs who can offer innovative and high-quality lending tools.
Investments
With active crypto users surpassing 300 million and growing at a rapid rate, private wealth management firms are quickly expanding their services to include embedded crypto investment options in their platforms.
Embedded investments make investing even more accessible and convenient to retail investors and companies. Users don’t have to go through the process of opening a separate investment account or navigating a complex investment platform. Non-financial companies can generate new income streams and diversify their offerings.
Embedded investments are predicted to be the fastest-growing sector in embedded finance, with a global market growth of 421% over the next five years and almost $11 billion in revenue by 2027.
Platforms like RobinHood, eToro, and Revolut were among the first to dismantle the traditional barriers for crypto investors by offering the ability to purchase and trade cryptocurrencies without the need for a wallet. The move brought a new type of investor to the market and resulted in these fintechs doubling (or more) their customer bases.
Now, the race is on for brands and non-financial companies to integrate crypto investment platforms directly into their products or services. This provides a unique opportunity for fintechs to provide a range of Web3 API-based tools and software, allowing companies to seamlessly onboard users into DeFi, NFT, and other digital asset markets.
Payments and Micropayments
Embedded fiat payments have become commonplace in apps such as Uber and Lyft. API providers like Plaid and Stripe offer many companies the opportunity to embed payment options directly into their platforms.
The crypto payment industry is growing too. Layer 1 blockchains like Solana allow for fast, reliable transactions using stablecoins like USDC. Fintechs can harness this potential by embedding crypto payment options into ecommerce sites, content subscriptions, one-off payment links, website “tip jars”, and more.
Using Web3 payment protocols for secure, low-cost transactions can finally be the key to unlocking the micropayment economy and offers an exciting potential source of growth and revenue for forward-thinking fintechs.
Wrap up
Embedded finance and Web3 are changing the way companies do business. They’re also opening up new ways for users to manage their finances and invest their wealth. Put them together, and you’ve got a recipe for success.
What’s the first step to onboarding Web3 users to your fintech services? Well, Web3 API-based Platforms like Blockmate, Plaid, and Hatchfi allow you to quickly and securely add Web3 wallets to your app or website. They also offer services like Web3 analytics, risk scoring, and compliance tools. This makes it easy for you to build embedded finance features and future-proof your fintech.
So, go ahead and find the embedded finance niche or use case that best suits you. Then reach out to these platforms to find the perfect fit for your needs.