When, where, and how individuals interact with financial services have been significantly altered thanks to embedded finance, which also offers significant opportunities for financial and non-financial businesses to reach a larger market.
As merchants, working without embedded finance means you are working too manually. It effectively supports trade for us. The creation of secure and effective payment methods has revolutionized the way that businesses conduct their business as they continually try to improve their trading systems.
The fact that many MSMEs (micro, small, and medium-sized enterprises) in Africa are still unable to create bank accounts, one of the most fundamental financial services, and must instead rely on more ‘crude’ techniques to keep their money secure, is no longer a secret. Over time, merchants used manual bookkeeping and cash management techniques, but these techniques were ineffective.
African fintechs have utilized embedded fintech to provide a variety of financial services, such as payments, business analytics, financial software, and more. An approach that has gone a long way in enabling African merchants
Enabling Merchants in a Digital Ecosystem
Over 90% of all firms in Africa are MSMEs. Despite being crucial to the continent’s economy, they frequently have trouble getting along with traditional financial service providers.
Small businesses are effectively shut out of the established financial system, which forces them to accept cash payments. Without having to rely on financial institutions, embedded finance can provide merchants with access to financing solutions. Merchants can be paid instantly through the app rather than having to wait for bank transfers or accept cash payments.
Enabling African merchants means that financial service providers minimize the expenses and difficulties associated with creating and maintaining their financial infrastructure.
Enabling African merchants means that financial service providers must create an interface that allows merchants to control their cash flow. Businesses can gain greater insight and control over their cash flow and eliminate error-prone conventional financial management methods.
Another way fintech can enable merchants to offer seamless trade experiences is through card issuing. The use of physical, virtual, or hybrid payment cards by innovative financial service providers can help speed up transactions for merchants.
It’s crucial to remember that embedded finance benefits customers, banks, companies, and fintech players. The growth of digital financial services will contribute massively to the increase in financial inclusion in Africa. We are more aware than ever that financial services and integrated finance are tools to achieve a goal. It catalyzes inclusive economic growth and enables merchants.
In today’s innovative world, businesses that adopt embedded finance technologies will have an enormous competitive advantage over others in their market. Enabling African merchants means that they get to spend less capital employing manual workforces that delay information and decision-making.
Market Opportunity
The essential enablers of commerce are financial services. The next wave of fintech innovation is anticipated to be characterized by embedded fintech, with firms in Africa and globally securing a higher percentage of investment.
Amazon, Uber, DoorDash, Walmart Instacart Google Pay, Apple Pay, and Venmo all enable embedded payments, letting customers place an order and pay for it all in one application. The likes of JumiaPay, Kippa, and Omnibiz are popular with Nigerians. While embedded finance is still in its infancy in Africa, we are likely to see trade driven by the underlying competitive structure that fintechs provide in the coming years.
The flow of commerce has grown to include financial services where transactions happen. According to McKinsey’s market-sizing model, embedded finance generated $20 billion in revenues in the United States alone in 2021. This growth can be attributed in part to the value of this integrated experience for clients.
By 2025, embedded finance will bring in close to $230 billion in income, according to Lightyear research. That is an over $200 billion reason to invest in Africa’s nascent embedded finance market.
With so much more digitization in the future (especially in emerging nations), it is projected that fintech will continue to siphon market share from financial services and even establish new sectors.
