BMF5355 Financial Systems and

Technologies

Embedded
Finance Redefining Financial Services in the
Digital Age
Presentation By:

Aishwarya Gadamsetti -
A0279084R
Elina Ly - A0279806M
Lim-Laurene Tea - A0278960M
Tanya Shukla - A0278664L
Tomasz Szymula - A0280080N
Wendy Du - A0278967Y
Introduction

Embedded Finance

Definition

1 The integration of finance in non- financial platforms and ecosystems, enabling seamless
transactions within apps, websites and services. Allowing companies to offer banking, lending,
insurances, or payments without needing to build out financial infrastructure.

User Centric

2 Financial services directly into platforms users already frequent, businesses enhance user
engagement, reduce friction in the transaction process, and increase customer loyalty. This trend
has reshaped how financial services are delivered and consumed across industries, from e-
commerce to ride-hailing.

Ecosyste m Grow th
3 Embedded finance has opened new revenue streams for businesses while improving financial
inclusion for consumers.
Introduction

Embedded Finance seamlessly integrates

with today’s B2B B2C applications
Embedded finance is most used in retail today and least Market Forecast CAGR
in Real Estate of 526%
+526%
720

115

2022 2032

79
%
Of the banks globally predict
banking will become deeply
Retail Food Fitnes Leisure Non Profit Health Travel Real embedded in everyday
Deliver s Estat
consumer activities.
Use cases

Buy Now, Pay Later Insurance Integration in

Ride-Sharing Apps

• Partnership with major retailers. Eg: SEA (Zalora, Lazada) • Insurance options are seamlessly integrated during user
activities such as booking rides or ordering food
• Instant Credit approval, payment broken into multiple terms
(3,6,9 months) • Offering embedded micro-insurance products like travel
insurance, driver insurance, and passenger protection
• Proprietary models enabling quicker approval processes within the Grab app

• 2 billion transactions ~5000 merchants

40-50%
Increase in sale value over standard payment ~65%
methods Access to insurance to underserved markets
Use cases

Financial Services in Digital and Embedded

B2B Payments in Consumer
Apps

• Offering services like payment processing, disbursements, • Enabling digital payments for purchases, utilities, and
and invoicing transportation services

• Efficient management of transactions thereby improving • Partnerships to enhance cross-border payment solutions
liquidity and integrate seamless payments into their and drive the embedded finance ecosystem in the region
platforms and a reduction of 50% payment processing time
• Provides investment products like micro-investment,
• Reduction of operational costs by up to 20% through embedding finance into everyday transactions
streamlined payment processing and financial services

12 billion
Annual SME transactions processed in 2023
~400 million Users on payments platforms
Use Cases

3. Financial Services in B2B Platforms

• Xendit is a payment gateway providing • Bukalapak's B2B marketplace integrates • Fazz (formerly Xfers) offers B2B
embedded payment solutions for financial services, including working capital embedded finance solutions for Southeast
businesses across Southeast Asia, offering loans for merchants, in partnership with Asian businesses, providing tools such as
services like payment processing, financial institutions. payment processing, lending, and digital
disbursements, and invoicing. wallets
• Small businesses can access credit directly
• It processes over $12 billion in transactions through the platform to support their • It manages over $10 billion in transaction
annually and helps SMEs integrate operations, with $500 million in total loans volume annually, helping businesses
seamless payments into their platforms disbursed by 2023. streamline their operations and improve
liquidity.
• SMEs using Xendit have experienced a 50% • Merchants using Bukalapak's credit services
reduction in payment processing times and reported a 30-40% increase in working • Businesses using Fazz have reduced
a 20% improvement in cash flow due to capital. operational costs by up to 20% through
faster disbursements streamlined payment processing and
Use Cases

2. Insurance Integration in Ride-

Sharing Apps

• GrabInsure is a partnership between Grab and Chubb in • Grab's app offers Buy Now, Pay Later (BNPL) options,
Southeast Asia, offering embedded micro-insurance allowing users to make purchases and pay in installments
products like travel insurance, driver insurance, and across its ecosystem, including ride-hailing and food
passenger protection within the Grab app delivery.

• Insurance options are seamlessly integrated during user • Merchants using Grab's PayLater have reported up to 25%
activities such as booking rides or ordering food higher transaction values on average.

• GrabInsure has sold over 20 million policies across • Grab PayLater saw a 40% year-on-year growth in 2023
Southeast Asia, with 25% of Grab drivers enrolled in its compared to 2022.
driver insurance program.
 Use Cases

1. Buy Now, Pay Later (BNPL) in E-

commerce

• Atome partners with major retailers across

Southeast Asia, offering Buy Now, Pay Later
(BNPL) services that split payments into three • Kredivo offers instant credit approval for
equal installments. online purchases, allowing users to pay in 30
days or in installments over 3, 6, or 12
• Integrated with platforms like Lazada and months, partnering with major e-commerce
Zalora, Atome has processed over $2 billion in platforms like Tokopedia, Shopee, and Lazada.
Buy Now, Pay Later transactions as of 2023, partnering with more
owing users to make than 5,000 merchants • Kredivo's proprietary credit-scoring system
in installments enables quick approvals, with over 6 million
m, including ride- • Businesses using Atome's BNPL services users in Indonesia and over $1 billion in credit
elivery. report a 20-30% increase in sales on average. issued.

rab's PayLater have • Merchants partnering with Kredivo have seen

Introduction

Importance Limitations of
of Traditional
Transformin Integration Financial
Models
g Financial Enhances customer retention and

Services reduces friction in transactions Navigating varying financial

regulations across different

through countries can be difficult,

especially when embedded finance

Embedded Provides seamless financial

products are integrated into non-
financial platforms.
Finance solutions within non-financial
platforms
With more financial services
integrated into non-financial
platforms, there’s an increased risk
of data breaches
Eliminates the need for multiple Scaling embedded finance solutions
service providers, capturing across different geographies
additional value for companies. requires adapting to diverse
financial ecosystems, consumer
behaviors, and technological
infrastructures.
Opportunities

Meeting a Broader Ability to offer diverse financial services within a

Spectrum of Customer single platform.

Needs
Benefits:

1
• Customized financial solutions.
• Seamless user experience.

Market Projection:
• Global market cap for embedded finance projected to
reach $7.2 trillion by 2030.
• US sector expected to generate $230 billion in new
revenue by 2025, up from $22.5 billion in 2020 (a
growth of 922%).

Enhanced Security Collaborations with specialized fintech providers

in Financial ensure compliance with regulatory standards.

Services Impact:

2
• Reduced risks and costs for businesses.
• Increased trust and reassurance for customers.

Survey Insight:
• 92% of corporate decision-makers plan to introduce
embedded finance solutions within the next five years.
• 85% prioritize customer experience and security
enhancements.
Opportunities

Improving Customer Streamlined processes like identity verification and

Experience transactions within a single ecosystem.

Benefits:

3
• Faster payments and more convenient interactions.
• Higher customer satisfaction by reducing friction points.

Impact:
• Up to a 20% increase in conversion rates.
• 5-10% improvement in customer retention.

Expanding Product Businesses can broaden their offerings to include

Offerings loans, insurance, and payments.

Benefits:

4
• Enhanced customer loyalty and engagement.
• Moves from one-time transactions to repeat
interactions.

Revenue Growth Potential:

• Up to a 5x increase in customer lifetime value.
• An additional $92 billion expected in the SME banking
market by 2025.
Use Cases

4. Digital Payments and Embedded

Payments in Consumer Apps

• ShopeePay is integrated into Shopee across Southeast Asia, • Touch ‘n Go eWallet is a leading digital wallet in Malaysia, offering
enabling digital payments for purchases, utilities, and payment and financial services integrated into transportation and
transportation services retail sectors.

• It has expanded partnerships, including with dLocal, to enhance • It provides investment products like GO+ micro-investment,
cross-border payment solutions and drive the embedded finance embedding finance into everyday transactions.
ecosystem in the region.
• With over 18 million active users, GO+ attracted more than 1 million
• As of 2024, ShopeePay has over 200 million active users and users and $300 million in assets under management since its launch
processes more than $20 billion in payments annually across in 2021.
Southeast Asia
 Sector-Specific Impacts

Flexible 1. E-commerce and

Payment Retail
Options

"1/4 merchants using Shop Pay Installments see a 50%

higher average order value"
Digital
Wallet
Impac
•
t
Supports consumer spending
(reduced cart abandonment)

• Enhances user experience and

BNPL satisfaction (faster checkout)
+
Instant • Strengthens customer retention,
loyalty
credit
facilities • Gives a competitive advantage
for businesses in the e-commerce
space
 Sector-Specific Impacts

Flexible 2. Ride-hailing and Travel

Payment
Options

Embedded
Insurance Impac
•
t Tailored protection to drivers,
passengers and travelers

• Improves customer satisfaction

• Fosters financial inclusion

Embedded • Encourages more drivers to join the

platform and start earning money

Lending • Grows driver base

 Sector-Specific Impacts

3. B2B Platforms

Impac
• t
Streamline invoicing and
payment processing, allowing
faster access to capital and
reducing friction in transactions

• SMEs benefit from embedded

financial tools like invoice
factoring, instant loans, and
credit services, helping manage
cash flow and focus on growth

• The B2B embedded payments

market is projected to grow
significantly, +252% from $1.9
trillion in 2021 to $6.7 trillion by
2026, as companies increasingly
integrate financial services into
their platforms
Disruption of Traditional Financial Models

Traditional Financial Models VS

Embedded Finance
Traditional Financial Models Embedded Finance

• Distribution through their own channels • Distribution of multiple services through one platform

• Strict legacy systems • Rapid innovation with driven technology

• Separation of financial services from non-financial platforms • Seamless integration of financial services into non-financial
platforms
• Limited personalization and slow approval processes
• Data-driven personalization and instant, automated services
• Requires customers to go through multiple financial institutions
• Offers financial services directly within consumer platforms
• Dependency on credit scores for access to financial products
• Uses alternative data for financial inclusivity
• Complex, slow onboarding processes for financial products
• Streamlined, embedded financial experiences with minimal
friction
Disruption of Traditional Financial Models

Traditional Financial Models VS

Embedded Finance
Distribution through their own channels or separately
Distribution of multiple services through one platform
requiring customers to go through multiple financial
institutions

Strict legacy systems Rapid innovation with

driven technology

Limited personalization and slow approval processes Data-driven personalization and instant,
automated services

Dependency on credit scores for access to financial products Uses alternative data for financial
inclusivity

Complex, slow onboarding processes for financial products Streamlined, embedded financial experiences
with minimal friction
Risks of Embedded Finance

Regulator Data Privacy Technological

y & Protection Risks
• Complianc
Platforms must follow • Risk of data breaches and • Integration issues with APIs
regulations like AML, KYC,
and PSD2 e
unauthorized access can lead to failures or
security vulnerabilities
• Compliance with GDPR and
• Non-financial platforms cross-border challenges • High costs for non-financial
face higher risks of non- platforms
compliance • Third-party vendor
vulnerabilities in data
• Cross-border services add handling
jurisdictional complexity
Role of API Interaction

How an API
Works:

Scalability and Adaptability:

• Ensuring APIs are secure and adaptable to evolving platform needs
Key
Considerations: Technical Expertise Requirements:
• Integration and management of financial infrastructure requires deep technical expertise,
increasing costs for non-traditional platforms

API Integration Issues:

• Poor API integration leads to system failures and data inaccuracies
Emerging Technologies

Emerging Technologies in Embedded

Finance
AI and Machine
Learning:
• Personalized services through data analysis -
CrediLinq.Ai's AI-driven credit solutions.

• Fraud detection with AI to combat rising fraud

losses ($40 billion by 2027).

Blockchain and
DeFi:
• Decentralized finance reduces reliance on
traditional banks.

• Growth of DeFi: $81 billion Total Value Locked

by early 2024, adoption in Traditional Finance -
J.P. Morgan’s Onyx.

• Smart contracts for efficiency but with risks of

vulnerabilities Put some text here to describe this graph
Outlook

The Future of Embedded Finance

• Ensure consumer protection, privacy, and security

Regulatory
1 Framewor
• Review of licensing, anti-money laundering, and data governance

• Global diversity in regulation and adoption levels

k

Complex • Improve third-party governance by developing an integrated risk management

2
strategy
Business
Relationships • Prioritize managing areas where external partners have access to internal systems
and customer channels
& Third-Party
Risks
Outlook

The Future of Embedded Finance

Data
3
• Importance of protecting consumer data in multi-platform environments

Privacy & • Models like GDPR and PSD2 as potential frameworks

Security

• Increase consumer's awareness on embedded finance

Financial
4 Literacy &
• BNPL as a key example (215% growth in 2021)

• Critical to improve financial literacy to prevent misuse

Inclusion
Outlook

Conclusion

Embedded finance is set to become a pivotal force in the financial

world, blending innovation with user-centered solutions while
ensuring a balance between growth and consumer protection.
Q&
A