True process innovation is when you can introduce your own twist on an existing technology to make it exponentially better. Take the classic process line introduced by Henry Ford, for instance. It revolutionised the industrial manufacturing sector.
It seems so obvious when you think about it, doesn’t it?
E-commerce is another excellent example of process innovation. Amazon and Flipkart offered us a more efficient way to buy books, and we never looked back.
Embedded finance has the potential to be the driver of the next process innovation in the fintech industry. Let’s find out how.
What is the role of embedded finance?
Embedded finance is when you integrate financial services into other non-financial services.
Take the example of Uber or Ola, for instance. You can book your cab, and you can also pay for your cab directly through the app.
The core of your operations remains your main product or service offering. Then you branch out, thinking about what complementary services your customer would require.
For instance, consider yourself to be the proud owner of a bakery. You have devised an innovative method of making a cheesecake, and you plan to open up a small bakery near your house to sell your cheesecakes.
The core of your business is the cheesecake.
And then you start thinking about how you can market that cheesecake. What are the best ways to attract your customer’s attention?
You’ll want to think about alternative channels of sale. You’ll list your products on Swiggy and Zomato. You might even have your own website for bulk orders or B2B orders.
Now you’re integrating multiple services into your business. And financial transactions come into almost every layer. You’ll integrate payment gateways and maybe even automated payout services. If you scale up, you’ll probably add other segments for tax payments and vendor payouts.
If you think about it, the potential applications of embedded finance are immense. The only drawback is that financial transactions fall into a highly regulated category. They are not that easy to understand.
This is where the potential of fintech firms comes in.
Why embedded finance is the next evolution in fintech
There is a sudden demand for easy-to-integrate financial solutions. Fintech firms have a unique opportunity to increase their product offerings and their market share.
From embedded banking to embedded investments, from lending to payment cards, the potential is enormous. And the fintech industry can capitalise on this potential.
They need to keep improving their product offerings in the embedded finance segment. Listening to what the market is asking for and incorporating that into the product offerings — that is the solution to success.
Fintech firms will have to put themselves in their customers’ shoes and think about what the specific pain points are. The Indian market is still largely untapped, and there is significant potential for growth. According to estimates, the embedded finance industry in India is expected to grow at a CAGR of 30%.
Well, the stage is set. On the one side, we have the demand for embedded finance products from customers. On the other side, we have the suppliers — the fintech firms.
Will they succeed?
Only time will tell!