Hello from the year 2030.
As you can imagine, the world is different now.
“How different?” you ask.
There’s a lot to say about flying cars and the metaverse but not today, I’ll tell you about that later. For now, let me tell you about how embedded finance has changed things around here.
Emeka who sells cars is able to offer his buyers insurance right along with their purchase. For buyers who aren’t able to pay in full for the car, they are able to take out a loan to finance their purchase. All from Emeka.
Back in 2022, customers had to go to a financial institution to get insurance coverage or a loan, but now they can get it from one place.
That’s not all.
Recently, Bisi’s airtime finished on an important call and, due to some technical issues, she was unable to purchase airtime through her banking app. So, she quickly used her ShopRite App, which has a funded wallet, to purchase airtime.
As the above scenarios about Emeka and Bisi show, embedded finance has changed the way people interact with financial services. Now non-financial providers offer their customers financial tools or services—such as lending, insurance, or payment processing, which is what embedded finance is all about.
Think of it as giving a car the ability to fly, or a plane the ability to move on water.
But how does it work?
Financial institutions offer their services—lending, insurance, or payment processing—as bundled offerings, often white-labelled or co-branded services, to these non-financial providers through Application Programming Interface (APIs)—a software intermediary that allows two applications to talk to each other.
Embedded finance has really made it easier for consumers like me to access financial services without having to interact with multiple financial service providers.
In 2022, when the embedded finance industry in Africa and the Middle East grew annually by 45.3% to reach $10.3 billion and was expected to grow from $10.3 billion to reach $39.8 billion by 2029, little attention was paid to embedded finance.
Already, Nigerian companies like Omnibiz and Trade depot, which were used by several businesses across the FMCG industry were able to integrate a payment processing feature to eliminate cash payments by retailers and layer BNPL (buy-now-pay-later) service for qualified retailers.
Many people weren’t aware that by removing consumer pain points, such as the need to seek credit elsewhere, customers were more likely to complete a purchase and experience satisfaction, which builds brand loyalty.
For businesses who used embedded finance, it increased profit as customers are more likely to make repeated purchases. These businesses could also generate significant revenue from offering financial services. It’s helped them better understand consumers, their spending habits and needs.
So as you can see Embedded finance holds so much promise for businesses across Nigeria and beyond.
I hope more people pay attention to it.