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Making Embedded Finance Work: A Guide for SMEs 

Estimated Read Time: 5 Minutes

Sean Owusu , 6 September, 2023

Welcome to the exciting world of embedded finance! Now, you may be wondering, “What’s this new jargon, and why should I care?” Don’t worry; you’re in the right place. Embedded finance is a game-changer, transforming how businesses—especially SMEs like yours—operate and interact with customers. We’re talking about offering financial services right within your own platform or app. Imagine your customers not just buying from you, but also paying bills, securing loans, or even taking out insurance, all without leaving your ecosystem. 

So, why is this a big deal for SMEs? First off, it’s an avenue for increasing revenue without having to reinvent the wheel. Secondly, it offers a customer experience so smooth it’s like hot butter on toast. The cherry on top? Enhanced brand loyalty. 

Intrigued? Stick around as we delve into the nuts and bolts of embedded finance, break down how it can boost your business, and offer you practical advice on implementing it effectively. This is your roadmap to transforming your SME into a one-stop-shop that customers don’t just like but love. 

What Is Embedded Finance, Anyway? 

Embedded finance is essentially integrating financial services, like payments, lending, or insurance, directly into your existing business platform. In simple terms, it’s like adding a mini bank to your online shop or app. Imagine a customer shopping on your website, and instead of being redirected to another page or app to make a payment, they do it right there on your platform. Or picture this: Someone buys a laptop from you and gets offered a loan or an insurance plan for it on the spot. Convenient, isn’t it? 

Now, you might be thinking, “Isn’t this just another way to complicate my already complicated business?” But hear us out—this is less about adding layers of complexity and more about streamlining experiences. It’s not just a snazzy add-on; it’s a way to give your customers what they need, where they need it, creating a seamless experience. 

Still sceptical? Consider this. Have you ever abandoned an online shopping cart because the payment process was a hassle? You’re not alone; many of us have. With embedded finance, you’re eliminating those stumbling blocks that send customers running for the hills—or, in this case, another website. 

So, is embedded finance just a fancy buzzword? Definitely not. It’s an actionable strategy to make your business more versatile and customer-friendly. 

Alright, now that we’re all on the same page about what embedded finance is, let’s talk about why your SME absolutely, positively needs it. 

Why Your SME Needs Embedded Finance 

By now, you might have a rough idea that embedded finance is good news for your business. But let’s dial down and talk specifics. Why should you, as an SME owner, sit up and take notice? Well, the benefits are threefold: it can help you improve customer experience, open up new revenue streams, and last but not least, enhance brand loyalty. Let’s unpack these, shall we? 

Improve Customer Experience 

Let’s face it; in today’s fast-paced world, everyone values convenience. When customers shop or interact with your platform, they’re not just buying a product or service; they’re also buying an experience. And let’s be honest, who wouldn’t appreciate a smoother, more streamlined shopping journey? 

Embedded finance allows you to offer exactly that—a hassle-free experience. Think about it: no more switching between apps or being redirected to third-party payment processors. Everything happens in-house. You’re essentially rolling out the red carpet for your customers, making their lives easier and, in turn, making them more inclined to stick around. 

Increase Revenue Streams 

Ah, the golden words: “increase revenue.” By integrating financial services into your platform, you’re not just selling your primary products or services; you’re also offering additional value through things like loans, insurance, or in-app wallets. That means you’re tapping into new revenue streams without even having to diversify your product range. 

So, what’s the catch? Well, there isn’t one, really. It’s like finding an untapped gold mine right in your backyard. These added services can create a new channel for income, and who doesn’t love some extra cash flow? 

Enhance Brand Loyalty 

Customer loyalty isn’t just about offering quality products or services anymore. In a world flooded with choices, loyalty is often linked to how easy and enjoyable you make the entire buying process. By offering embedded finance options, you’re increasing the chances that customers will see your platform as a one-stop-shop for multiple needs. Less hassle means more loyalty. And more loyalty? Well, that’s business gold. 

In essence, adding embedded finance to your SME toolkit is a bit like adding seasoning to a dish. It’s the extra ingredient that takes things from good to ‘can’t get enough!’ 

Getting Started with Embedded Finance 

Okay, you’re sold on the idea. Embedded finance is the unsung hero your SME needs. But how do you go from “Wow, that sounds amazing!” to actually making it a reality? Let’s break it down into manageable chunks. 

Identify the Type of Financial Services That Align with Your Business 

First things first. What sort of financial service does your business need? Is it payment processing, or could your customers benefit from on-the-spot loans? Maybe a smattering of insurance options could make your platform more appealing. 

Payments: If you’re running an online store or any platform that involves transactions, this is a no-brainer. Speed up and simplify the payment process by integrating it into your app or website. 

Lending: Run a business where customers make big-ticket purchases? Offering financing options can be a win-win. 

Insurance: If you’re in a sector like travel, home improvements, or electronics, offering insurance can add value to your product and peace of mind for your customers. 

Choose the Right Fintech Partner 

This is crucial. You’re about to integrate another service into your platform; you better make sure it’s reliable. So, how do you pick the right fintech partner? Here’s a handy checklist: 

Compatibility: Make sure their services integrate smoothly with your existing platform. 

Compliance: You want a partner who knows their regulatory ABCs. 

Customer Support: If things go south, you’ll need swift and effective support. 

Choosing a fintech partner is a lot like finding a roommate; you need someone who shares your vision, meets your standards, and can be trusted every day. So do your background check. Interview, verify, maybe even visit their previous place. Trust us, you wouldn’t move in with the first person you met on the street, would you? The same logic applies here. 

Implementation and Testing 

Once you’ve picked a fintech partner, the next step is the actual implementation. This might involve some tech-heavy work, but that’s what developers or tech partners are for. After implementing, run multiple tests to make sure everything’s ticking like clockwork. The last thing you want is for a customer to encounter a glitch during the payment process. 

And there you have it! These are the stepping stones for implementing embedded finance into your SME. It’s not rocket science; it’s just smart business. What comes next, you ask? Well, you’ll want to make sure you’re doing things by the book. 

Compliance and Security 

Alright, brace yourselves; we’re diving into the less glamorous but absolutely crucial part of embedded finance—compliance and security. Don’t worry, we’ll keep it as thrilling as possible. Compliance isn’t just red tape; it’s your safety net. It keeps you on the right side of the law and assures your customers that they can trust you. So, let’s get to it, shall we? 

Know Your Regulations 

When you’re in the financial space—even just dipping your toes like with embedded finance—you’ve got to acquaint yourself with some alphabet soup. PSD2, GDPR, and AML are not acronyms to gloss over. 

PSD2 (Payment Services Directive 2): If you’re in Europe, this is the rulebook you need to follow for online payments. It mandates things like strong customer authentication. 

GDPR (General Data Protection Regulation): Handling financial data? Then you’re also handling personal data, which means GDPR applies to you. 

AML (Anti-Money Laundering): You might think, “Hey, I’m just a small online shop; why worry about money laundering?” But if you’re processing payments, you have to ensure those payments are above board. 

Security Measures to Look for in a Fintech Partner 

You wouldn’t leave your front door unlocked, would you? The same applies to your business, especially when finances are involved. When choosing a fintech partner, you want to make sure they’re Fort Knox-level secure. Here’s what to look out for: 

Data Encryption: This turns sensitive information into unreadable gobbledegook for anyone who shouldn’t be snooping around. 

Two-Factor Authentication (2FA): An extra layer of security never hurt anyone. 

Regular Audits: A fintech that doesn’t regularly check its security measures is a ticking time bomb. 

Now, if the fintech partner you’re eyeing ticks all these boxes, give yourself a pat on the back; you’re on the right track. 

Seek Legal Advice 

Compliance is one area where it’s okay to call in the experts. A little legal advice can go a long way in saving you a tonne of trouble down the line. While some fintech partners offer compliance as a package, it’s good to get a second opinion. 

And there you have it—compliance and security demystified. Sure, it’s not the most exciting part of embedded finance, but think of it as the foundation of your financial services house. Without it, the whole thing could crumble. 

Case Studies—Embedded Finance in Action 

Okay, enough theory and guidelines. Let’s get into some real-world examples. Because when it comes to business, nothing speaks louder than success stories, right? Here are a couple of SMEs that have successfully implemented embedded finance and lived to tell the profitable tale. 

Now, we’ve had the pleasure of helping some SMEs transform their business models through our loan services. While they’ve graciously allowed us to share their stories, they’ve asked to remain anonymous. So for the sake of this discussion, let’s call them ‘TechShop’ and ‘LocalTrips’. Here’s how embedded finance catapulted them into a different league altogether. 

Case Study 1: The Online Retailer That Became a Financing Wizard (Let’s Call Them ‘TechShop’) 

This SME started as a straightforward online retailer of electronic gadgets. But with our loan services, they were able to collaborate with a fintech company to offer financing options seamlessly. The change was instant—customers could now buy that shiny new laptop or smartphone through easy monthly instalments, without ever leaving the platform. Cart abandonment rates? They took a nosedive, while sales shot up. TechShop became more than a retailer; they became a platform offering convenience and affordability. 

Case Study 2: The Local Holiday Booking Site That Insured its Way to Success (A.K.A ‘LocalTrips’) 

Our next beneficiary, or as we’re calling them, ‘LocalTrips,’ took their holiday booking service to the next level. With our loans, they partnered with a fintech specialising in insurance, offering customers the option to add different travel insurance packages right at checkout—in one click, no less. The result? Sky-high customer satisfaction. They didn’t just offer holidays; they started selling peace of mind, and they found a new revenue stream to boot. 

What Can We Learn? 

What’s the moral of these stories? Embedded finance isn’t just a flash in the pan. It’s transformative. These anonymised case studies—powered in part by our loan services—show that when executed well, adding financial services can supercharge your business. You’re not just making small improvements; you’re reshaping the way your customers interact with your brand. 

By now, you should have a solid understanding of the potential that embedded finance can unleash. Whether it’s offering payment options, insurance, or even personalised loans, the sky’s the limit. And remember, it’s not about adding complexity; it’s about simplifying life for your customers. A more streamlined, integrated service not only benefits them but adds another revenue stream to your business. Win-win, wouldn’t you agree? 

So, what’s stopping you? Got concerns about compliance? We’ve broken it down. Worried about implementation? There’s a roadmap for that. Inspired by the real-world cases? Those companies were once where you are now, pondering the same questions. And look where they are now, thanks in part to a little help from embedded finance (and our loan services, of course). 

If you’re still on the fence, that’s okay. Revolutionary steps take time and consideration. But don’t let inertia hold you back. After all, in the ever-evolving landscape of business, standing still is the first step towards falling behind. If you need some extra funds to start your journey with embedded finance, browse our range of funding solutions

BY Sean Owusu




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