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30 March 2022updated 31 Mar 2022 11:03am

The rise of embedded finance

We are committed to driving exciting innovations in the fintech world

By Mariquit Corcoran

Here at Rise, created by Barclays, we have evolved our corporate innovation model to focus on creating more growth for the fintech ecosystem as a whole. We are creating opportunities for founders to be able to step forward with ideas and for us to help them bring those to market. We’re trying to attract a more diverse talent pool. And we’re offering cost-free and equity-free programmes to the Rise ecosystem for companies at the initial idea stage.

About a month ago, we announced a partnership with a world-leading corporate innovation and venture development firm called Rainmaking. Our partnership has created our Rise Start-Up Academy, a “digital skills-building programme”, targeted at spawning initiatives that will drive innovation in the fintech world. We are really focused on making sure that we are enabling entrepreneurship to help these companies progress and, ultimately, create a viable and successful business.

There are so many exciting fintech companies in their infancies at the moment, so we decided to ensure each initiative has a distinct fintech theme to ensure the support we offer to participants is desirable, feasible and viable. One of the first of these initiatives to launch focuses on embedded finance.

Embedded finance is the integration of financial services into non-financial companies. For example, if you are buying a TV and need to borrow money to pay for it, the retailer would embed a loan application into the customer journey, so neither the customer, nor the company, are required to go to multiple places to complete a transaction. It allows companies to create really innovative financial offerings in a variety of fields, ranging from retail to healthcare, and agriculture to the music industry. The opportunities that embedded finance present benefit not only the customers, but banks and the technology companies that are involved in the process.

There are so many far-reaching benefits to the successful application of embedded finance. Firstly, it makes the process a lot simpler for the customer – there’s less friction, and the whole buying process is far more streamlined. But there are also significant benefits for the company. Embedding the financial process gives organisations increased customer loyalty, and by improving the customer experience it deepens that all-important relationship between the buyer and the seller.

Overall, there is little doubt that embedded finance has significant wins for all parties involved. The process for customers is fast and efficient. And for companies, delays to their sales process are a thing of the past. The whole experience is frictionless.

The embedded finance market has the potential to be exponentially larger than it is today, and with more improvements. In the near future, we believe there will be some financial aspect of metadata to any customer journey, whether it’s buying something from an online retailer or managing your income. In the music industry, for example, where you have workers who are paid per job and don’t necessarily have an easy way to manage their income, there may now be transparency embedded into the financial tools that they use.

This helps them better manage their finances. We are already seeing embedded finance for taxi drivers, for example. The driver who is paid per ride no longer has to manage their finances in a separate banking account – the company that employs them already has the technology and the banking is embedded for their drivers.

Of course, such technology is not without its challenges. “Buy now, pay later” services, for example, have provided some challenges for both retailers and customers, and have highlighted the need for certain responsibilities for the consumer, merchant and finance provider that must be considered. When providing these services, it is incumbent on the financial provider to be as transparent as possible, and make sure the language is clear and coherent. Similarly, merchants need to ensure that the finance providers whose products they embed follow best practice when it comes to responsible lending. I, myself, have been in this industry for a couple of decades, but I still make sure to reread the terms and conditions three or four times when making a purchase, to ensure I’ve fully understood my contractual obligations. There is a collective responsibility for everybody involved to make sure that people do understand what it is they’re buying. We do not want to turn this great innovation into a “later problem” for buyers – the language and expectations must be totally unambiguous.

Embedded finance is at the top of our mind as a new, exciting innovation that has the potential to transform the financial world. There are a number of companies in our Rise ecosystem here at Barclays that are working on embedded finance offerings, including Jifiti, an organisation that provides a white-labelled point-of-sale financing solution for any retail financing programme in any geographic location. WealthKernel is a company providing investment-as-a-service technology, enabling fintech providers to incorporate investment products and services into their offering.

As we can see, there are many organisations across the board exploring the potential of embedded finance, with more popping up every day. At Barclays, we are committed to supporting organisations to bring their ideas into fruition and driving forward innovation in the fintech world.

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