Embedded Finance - A New Way for Business

by Pria Masson Tanwar

Thu, 03 February 2022

Bahrain financial online services continue to grow

As online services continue to grow and develop, Pria Masson Tanwar explores the equally intriguing and lucrative world of embedded finance.

Around 15 years ago when I was studying for my Masters, we had some extensive courses on the importance of the value chain. With time, experience on the ground showed how costs can be cut and businesses streamlined if there is greater control over one’s own supply or value chain. This could take the form of a bank acquiring a company that offers innovative blockchain solutions or, the set-up of Neo banks as extensions of a banks existing platforms, acquiring the provider of your basic raw material, etc. – these are integrative moves. 
However, within the tech space there appears to be a move towards disintegration in some ways. The various elements of the value chain, which were previously done by one entity, are being broken down into their own separate elements. That’s the beginning of Backend-as-a-service, Banking-as-a service, Lending-as-a-service, Software-as-a-service – the list just keeps getting longer.   

In line with this, I stumbled upon the more detailed world of technology and API’s (Application Programmable Interface). With finance as my core interest, it got me thinking about my previous exploration into the world of FinTech and my curiosity in tow, I looked into how API’s have enabled embedded finance. 

Embedded Finance allows for digitised versions of buy-now-pay-later schemes, for installment schemes, prepaid cards, easy credit – and that’s the tip of the iceberg. API’s allow any offering to enter an agreement and gain access and interact with banking systems. 

Payment solutions and card processing currently seem to be the most popular form of embedded finance. In Bahrain, Sinnad which is a subsidiary of Benefit Pay, Infinios (previously NEC Payments) and NymCard (with Arab Financial Services) are all examples of emerging and established players in the space. Related to this, systems like Tap or MyFatoora offer a suite of services around allowing businesses to accept payments online.

bahrain online services continue to grow and developTake this a step further and you have Payment International Enterprise (PIE) which now provides a self-service platform for electronic payments for customs brokers, importers and customers to pay customs fees and taxes. 
Buy Now Pay Later systems are also gaining traction. Regionally, Zoodpay offers a seamless deferred payment solution allowing customers to make interest free payments for their ZoodMall online shopping orders with simple instalment plans. The success of their business model is evident in their successful Series A funding of USD10 million and a Series B round of USD38 million. 

Money is what moves any business, and any system that eases the flow of money from the payee to the recipient, is likely to be here to stay. Currently, embedded Finance generates revenues for USD22.5 billion globally but is expected to be worth over USD7 trillion by 2030.
The world of technology is complicated, very intriguing and extremely lucrative. The complications and details are like a deep web and if each branch turns into its own clear offering, embedded finance is likely to create novel connections among different businesses, their consumers and the systems that run all of the above. In a way, it’s like the disintegration is likely to case integrations like never before. To survive, almost all businesses are going to have to explore, accept and adapt really fast.