Embedded Finance: Changing Consumer and Business Interaction

The way people engage with their money has changed significantly over the last decade and accelerated during Covid. Consumers and businesses want to be able to interact with their finances digitally, wherever they are, whenever they want. And that has led to exponential growth in the embedded finance and payments sector, which has now become a trillion-dollar industry.

“There are four ways in which embedded finance has grown,” said Galileo CEO Derek White, in a recent interview with PYMNTS.com. “The ease and speed of payments embedded into the interaction experience itself; the facilitation of credit and lending; the proliferation of insurance products; and the actual brand experience built around financial services and the money movement associated.”

White believes that it all comes down to trust, which has been the biggest driver behind the growing adoption of digital finance products and services. “People trust that they can tap on the glass, rather than sign a piece of paper, or exchange cash,” he noted. “They can complete easy, simple, secure transactions. It’s been fascinating to see how the interaction of humans, technology and money associated with these movements of goods and experiences has changed. They trust the glass.”

Furthermore, the growth of embedded finance has spawned an interconnected network of digital transaction stakeholders. “Bloggers, manufacturers, and consumers are all connected now through the movement of goods and services and the payments associated,” observed White. “This is creating massive opportunities for entrepreneurs, creators, businesses, and the consumers on the other side. It’s all an ecosystem.” It’s not only the B2C space in which embedded finance is making an impact. The B2B space, known for lagging when it comes to adopting tech, is now starting to catch up to B2C. “Galileo is increasingly moving into the B2B space because the use cases are there, such as virtual and digitizing payments, sending digital cards, extension of credit, and extension of insurance,” explained White.

One of the big drivers behind B2B’s adoption of embedded finance is that it helps to eliminate the friction points that have long been associated with traditional finance products. “Embedded finance helps businesses save on time, cost of transportation, and it gives them piece of mind of knowing the money is in the account,” said White. While the banks continue to play a significant role in the securing and movement of money, FinTechs now play a key role in the customer experience. White explained, “FinTechs help to create differentiated automated customer experiences, while banks bring all of the products together, such as payments, credit products, and insurance, below the glass.”

Furthermore, FinTechs have made additional significant contributions to the digital finance space. “Two things: Early access to paychecks, which has been hugely valuable for customers, and financial literacy education for children and teens. Tech provides children and teens opportunities to learn by engaging with money, learning how to spend and save,” noted White.

“It’s really powerful and rewarding to hear stories and examples of how financial literacy is being created through innovation.”