André Jasch

Embedded Finance

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White Paper „Embedded Finance“ über die wachsende Rolle von Finanzdienstleistungen in Unternehmen, deren Kerngeschäft ursprünglich nichts mit Finanzen zu tun hatte. Auftragsarbeit für die PR-Agentur „schoesslers“.

A growing number of companies are integrating financial services into their product portfolio, while retaining complete control over the customer experience. These services include banking, payment, insurance and lending. Early adopters in the field of embedded finance in Germany were non-financial businesses such as discounter Lidl and consumer electronics retailer MediaMarkt Saturn, followed closely by players like ADAC, Daimler Mobility, and Grover, who are expected to bring embedded financial products to the market soon.

Lidl has launched ‘Lidl Pay’, a payment system within its own app. Customers activate the payment option by entering their bank details and address. By scanning the app at the checkout, customers can redeem their coupons in one easy step, pay with Lidl Pay if they wish, and receive a digital receipt. The advantage for customers is that they receive credit for their next purchase, and the advantage for the company is better customer retention. By implementing an embedded finance solution, Lidl now has the opportunity to engage closely with their customers through its app. In addition to the new payment option, customers are shown personalized content based on their previous shopping behavior.

Other examples of embedded finance are Buy Now, Pay Later (BNPL) models as used by large retail companies such as MediaMarkt Saturn. When customers buy consumer electronics, instead of paying immediately they take a loan directly from the company that they pay off over time. BNPL models from payment service providers such as Klarna or Ratepay have been a driving force behind the early success of embedded finance. The BPNL market is still growing and is expected to reach a volume of $20 billion by 2028, according to a Grand View Research Market Analysis.

Banks and other financial institutions were reluctant at first, since they mainly saw embedded finance as competition for their business models. However, this is not the case. Banks are in an excellent position to take a leading role in its development. It is them who have the deep industry expertise, reach, credibility, strong balance sheets, and direct access to cost-effective capital. Moreover, financial service providers today see the benefits of embedded finance, enabling them to stand out in a highly competitive field and reach new audiences with customized and directly integrated services.