Embedded finance
Embedded finance

Money 20/20 recap: Embedded finance trends in Europe

Fintech’s biggest conversation is heading to the U.S. and in preparation, we’re doing a roundup of key embedded finance trends that we saw at Money 20/20 Europe. ‍

Fintech’s biggest conversation is heading to the U.S. and in preparation, we’re doing a roundup of key embedded finance trends that we saw at Money 20/20 Europe. ‍

Financial inclusion brings SMEs to the forefront

An overarching theme at the conference in June was without a doubt, financial inclusion for SMEs. 

Historically, small and medium-sized businesses are locked out of financial services by banks due to the size and nature of their business. But now, with embedded finance paving the way for an easy application journey, financial inclusion is bringing SMEs at par with more established businesses to “start, run and grow their business.” 

In an exclusive interview with the Paypers, Jakob Pethick, CCO at YouLend, describes how embedded finance is changing the ballgame for SMEs in terms of providing SMEs the same access to financial services as bigger companies.

Alternative data introduces a new risk-modelling framework

In parallel, financial services are expanding their reach by using alternative data sources at every level, but particularly on the credit risk assessment side. Mikkel Velin, Co-CEO of YouLend, stated in his interview with Finextra at Money 20/20 that alternative data is the by-product of SMEs “shifting away from traditional banks” to meet financing needs. 

Banks, traditionally, are focused on “old data” from reports that are often a simplistic view of a business’s financial health - such as revenue and operating history. Embedded finance focuses on “live data points that indicate the heartbeat of a business” so as to not exclude SMEs based on the size, nature, and maturity of their business. Ultimately, alternative data has the power to serve more merchants and bring modern risk assessment to extend funding to as many merchants as possible.

Banks and platforms want to partner with providers who offer the best customer experience 

With embedded finance, banks and platforms have also focused on the trend to elevate their merchant experience. In order to maximize retention and unlock new revenue streams for relatively low costs, they want to partner with providers who offer the most convenience to end users and provide scalable financial products. 

At Money 20/20 Amsterdam, the experts were indicating that those who successfully partner with providers can:

  • Create new revenue streams by extending into a new vertical
  • Nurture merchant loyalty by providing value-adding financial services
  • Offer a seamless customer experience to delight users 

Embedded finance proves to be a win-win-win scenario for all 

Financial IT also brought to the forefront that embedded finance is a golden opportunity for all stakeholders. Mikkel Velin said “YouLend wins if our partners win, and our partners win only when their end users win.”

With that, platforms such as Shopify and eBay are able to shake up the entire value chain and bring fast, flexible and affordable financing to merchants. 

Through embedded finance, platforms obtain longer lifetime value for their sellers, and merchants are able to plan better for the business challenges ahead.

Recap: Embedded finance trends

Based on our roundup, it is clear that embedded finance is poised to grow even bigger in the coming years, with an expected 5x time growth in embedded lending over the next five years.

At Money 20/20 EU, it was the hot topic for all industries across the fintech space and it presents a clear, compelling case: increased access to financial services for SMEs, better merchant experience, and new revenue streams for platforms.

Book a meeting with the YouLend team at Money 20/20

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