More industries than ever before are now offering embedded financial services on their platform, with over a million new providers entering the market every year since 2020. From payment providers, lenders, banking, insurance, payroll to retailers and e-commerce marketplaces - all major players are now looking to launch their own embedded financial services to gain a head start on the competition.
With a $7 trillion dollar valuation over the next ten years, it’s difficult to ignore embedded finance for much longer. YouLend has summarised five reasons why embedded finance is the next big trend in digital banking and how your company can get started on the solution today:
White-labelled embedded finance is the most powerful vehicle driving the fintech industry. With a white-labelled financial product, businesses can integrate their preferred financial solution from a provider and still present it under their own branding. All KYC and AML checks are done automatically by the provider, and the company can customise the product to their specific needs, offering a best-in-class, seamless digital experience all under their own branding. This is a huge reason why embedded finance has grown in popularity compared to traditional financial services, as companies do not have to go through an expensive process of ‘reinventing the wheel’ in order to launch a new financial product.
2. No cost to build
Low cost-to-build is another reason why embedded finance is all the rage. Previously, businesses had to invest in an expensive cloud-native technology platform to build their own financial solution, and the costs were invariably passed onto the consumer in the shape of nearly 5.7% higher fees, as cited by a Citigroup representative. Price hikes such as these often deterred small businesses in need of finance, but low-cost embedded finance solutions can help a company launch products without any development overheads - taking a major expense out of digitising. With transparent, affordable fees and multiple capital sourcing, providers like YouLend can offer competitive prices and get the best deal for lenders.
3. Quick to market, quick to lend
8% of SMEs say accessing ﬁnance is the biggest issue facing their business. Hence, in order to tap into the SME market, lenders need to be flexible to small businesses needs. Embedded finance makes that possible by helping firms bring new products to market quickly with battle-tested codes and risk assessment models ready to go! YouLend, for example, can launch a complete turnkey solution in as little as seven days.
When it comes to lending, 57% of all SME credit applications are abandoned because they’re too difficult to complete or are ultimately rejected, but with non-traditional credit checks, simple applications, and industry-leading APIs, YouLend’s embedded finance solutions enable a 90% approval rate with same day offers and funding, catering to SMEs’ need for speed.
4. No coding required
Affordable embedded finance doesn’t need to be rocket science. Currently, the four largest US banks spend $50bn a year on digital banking technology such as cybersecurity, regulations, and infrastructure maintenance - which can, fortunately, be bypassed with embedded finance solutions. When it comes to build costs, embedded finance solutions are ready to go with no need for internal coding or expertise. That is why it's so easy to implement and prepped to take the financial services industry by storm.
5. Seamless digital journey
Embedded finance keeps customers coming back. We’ve already seen that more than half of SMEs will abandon applications for funding when the process is too difficult, which is why it’s so important to provide a simple, seamless digital journey. With embedded finance, companies can apply for funding quickly through a bank’s digital platform, and white labelling integrates that product into the user’s overall experience. This is an area where challenger banks are currently ahead.
According to research, neobanks are 75% more likely to prioritise customer experience in serving SMEs than their traditional counterparts and are planning to invest on average 36% more in the SME sector over the next three years compared to incumbents. Consequently, digital banks show a net improvement in customer experience by 24%, as compared to only 12% among traditional banks. However, with embedded finance solutions - traditional banks can also leverage simple applications, fast approval, and revenue-based financing options tailored to SMEs’ diverse needs.
With traditional banks pouring massive investments into technology, and new neobanks still taking the forefront in financial services, it’s fair to say the movement towards digitisation is going to continue. It’s no wonder more than 55% of banks worldwide are already partnering with fintechs to better serve their clients, and YouLend’s embedded finance solutions allow banks to continue enjoying the benefits of their size and established reputations while offering a best-in-class digital service that keeps them competitive with challengers.