Embedded finance is revolutionising the way small businesses operate by integrating financial services directly into their platforms. This innovation removes traditional barriers to wealth creation by providing businesses with easier access to essential financial tools, such as lending, payments and insurance. For small businesses, this means more streamlined operations, enhanced customer experiences and new revenue opportunities. Philipp Buschman, Co-founder and CEO, AAZZUR, discusses how SMEs can offer tailored financial products to their customers by leveraging embedded finance.
The embedded finance market is on track to hit a mind-blowing US$584 billion by 2027. That’s not just a random stat – it’s a clear sign that the way we handle financial services is getting a serious upgrade. For small- and medium-sized businesses, this isn’t just an interesting trend; it’s a golden opportunity. Embedded finance is tearing down old barriers and opening up fresh, exciting paths for growth and financial inclusion. It’s basically rewriting the playbook on how businesses can create wealth.
It’s everywhere, and here’s why it matters
Embedded finance might sound like jargon, but it’s shaping up to be the secret weapon for SMEs across Europe. Picture this: you book a cab through an app, and right there, you’re offered insurance for the ride. Or you’re shopping online, and as you check out, there’s a smooth credit option waiting for you. This isn’t just convenience; it’s a game-changer for businesses.
For SMEs, embedded finance is more than a nifty feature – it’s a powerful tool that’s changing the way businesses operate. By integrating services like payments, lending and even insurance directly into their platforms, SMEs can do more than just enhance customer experiences. They can streamline operations and tap into entirely new revenue streams. And let’s be honest, who wouldn’t want that?
Powerhouses behind the movement: Solaris and Railsr
Let’s talk about some real players in this space. Solaris, a Berlin-based FinTech, is one of those companies making waves across Europe. They’re offering SMEs the ability to embed a wide range of financial services – everything from payments to full-on digital banking – right into their platforms. Imagine a small retailer being able to offer their customers credit directly on their website, without needing to send them off to a third party lender. Solaris makes that possible.
Then there’s Railsr, another European innovator. Originally known as Railsbank, they’ve been pivotal in providing the infrastructure that allows SMEs to offer financial products without having to become financial institutions themselves. For example, an e-commerce platform can offer a Buy Now Pay Later (BNPL) service at checkout, boosting sales and keeping customers happy – all thanks to the tools Railsr provides. This isn’t just about selling more; it’s about building a financial ecosystem where the SME isn’t just a player but a key part of the value chain.
Making finance accessible: a revolution for SMEs
In the past, getting access to financial services like loans was often a nightmare for SMEs. The process was slow, the approval rates were low and the fees were sky-high. Embedded finance is turning that on its head. Now, a small business can offer or access lending options directly through platforms they’re already using – no need for complicated bank applications. This accessibility can be a game-changer for SMEs, giving them the funds they need to grow without the usual headaches.
Take payroll as another example. SMEs can integrate on-demand pay options into their payroll systems, allowing employees to access their earnings before payday. It’s a win-win: employees feel more secure and businesses benefit from a more engaged and productive workforce. This isn’t just about managing cash flow better; it’s about creating an environment where everyone thrives.
New revenue streams: Joining the financial ecosystem
Embedded finance is also opening up entirely new revenue streams for SMEs. By embedding financial products into their offerings, businesses can participate in the financial value chain in ways that were previously out of reach. Think about an SME in the e-commerce space. With embedded finance, they can offer BNPL options, increasing conversion rates and boosting the average order value. Or consider offering embedded insurance at the point of sale – customers get peace of mind, and the SME gets an additional income stream.
Solaris and Railsr are again awesome case studies for these use cases. They provide the necessary infrastructure that allows SMEs to offer these financial products without the heavy lifting. This means more than just staying competitive – it’s about expanding their role in the financial ecosystem and driving growth in ways that weren’t possible before.
Levelling the playing field: Competing with the big boys
Here’s the thing: big enterprises have always had the upper hand when it comes to offering sophisticated financial services. But embedded finance is levelling the playing field. SMEs can now integrate advanced financial services into their platforms, offering customers the same seamless experiences they’d expect from larger companies.
Take Solaris as an example. They enable SMEs to embed a wide range of services – payments, loans, digital banking – directly into their operations. Railsr is doing something similar, allowing SMEs to tailor financial products specifically for their customer base. These capabilities allow smaller businesses to compete directly with the big players, offering the same convenience and security and capturing more market share in the process.
Keeping it simple: Focus on what matters
Running an SME is already complex enough. The last thing a business owner needs is to get bogged down with managing financial services. Embedded finance simplifies this by integrating everything into the platforms SMEs already use. No more juggling separate payment gateways or liaising with multiple financial providers. It’s all about reducing complexity so businesses can focus on what really matters – growing their business.
For example, if you’re an SME using an e-commerce platform with embedded payments, you don’t have to worry about managing a separate payment system. Or if you’re offering embedded lending or insurance products, these can be managed directly through your existing systems. This not only saves time and reduces headaches but also frees up resources that can be reinvested into core business activities.
Looking ahead: How to get started
If you’re an SME looking to explore embedded finance, the first step is to really understand what your customers need. What financial services could add the most value? How can these be integrated into your existing platform to create a seamless experience?
Once you’ve got that figured out, it’s all about finding the right partners. One that can provide the technology and expertise to embed financial services into your business with minimal hassle, letting you focus on what you do best.
Finally, it’s crucial to keep an eye on the ever-evolving landscape of embedded finance. As technology continues to advance and customer expectations rise, the opportunities for SMEs to leverage embedded finance will only grow. Staying informed and agile will help you stay ahead of the curve and unlock new avenues for growth and wealth creation.
Conclusion
By integrating financial services directly into their operations, SMEs can remove barriers to growth, open up new revenue streams and compete more effectively with larger enterprises.
With the right strategy and partnerships, embedded finance can be the key to driving growth, creating wealth and securing a prosperous future in today’s digital economy. So, if you’re not already considering embedded finance, now’s the time to start.