Embedded finance and embedded fintech are terms often used interchangeably, but they can be distinguished by their scope and application within digital ecosystems.
Embedded Finance broadly refers to the integration of financial services within non-financial companies’ platforms. This allows those companies to offer financial products directly to their customers as part of their usual interactions. For example, an online retailer might offer financing options at checkout, or a ride-sharing app could include a digital wallet for payments and rewards. Embedded finance aims to create a seamless user experience, where financial transactions are integrated naturally into the customer’s journey on a platform.
Embedded Fintech, on the other hand, is a subset of embedded finance. It specifically involves the use of financial technologies (fintech) to power these integrated services. While embedded finance focuses on the end-user experience of accessing financial services through non-financial platforms, embedded fintech emphasizes the technological innovations and financial technology companies that enable this integration. It involves the tools, platforms, and software developed by fintech companies that make it possible for non-financial businesses to embed financial services into their offerings.
In summary, embedded finance is about the concept and practice of integrating financial services into non-financial platforms, enhancing customer experience and service offerings. Embedded fintech focuses more on the technological aspect, referring to the fintech solutions that enable the embedding of financial services into various platforms. Both are part of a larger trend towards financial services becoming more accessible and integrated into a wide range of consumer and business activities.