Embedded finance as a way to increase customer loyalty

Embedded finance seems like a no-brainer for most companies; however, integrating the right products for certain company goals can be tricky to navigate. We explore some of the options and their benefits.

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Many companies are looking for ways to increase revenue and customer loyalty simultaneously by dipping into embedded finance options. And while most companies recognize the need, selecting the right products to offer is the tricky part.

 

Bridging the gap between brands & finance

Retail embedded finance includes lending, insurance, digital wallets, integrated payments, and debit cards. Many companies have already integrated embedded finance, such as Walmart, Klarna and Costco with their closed-loop credit cards that function like bank-issued cards; but this is just the tip of the iceberg, as they are still using physical cards.

 

With embedded financial services, companies can offer financial services throughout the digital customer experience and prevent customers from navigating away from their website to complete a transaction. 

 

Various embedded finance products 

Examples of embedded finance products that companies can launch include the following:

• Insurance: Retailers of large assets that require insurance can offer their own insurance. For example, ride-hailing companies like Uber offer insurance coverage for drivers. This allows your customers to purchase insurance directly from the company at the point of purchase rather than shop around for insurance from a separate provider and deal with connecting the two.
• Wearable wallets: Location data companies and fitness brands like Fitbit have embedded payment capabilities into their wearable devices, allowing customers to pay for services and goods while on the go.
• Financing: Some companies like Shopify offer their customers business loans by using data about the seller’s revenue rather than credit checks. Repayments can also be scheduled as a percentage of sales, like with Liberis. Find out more.
• Digital wallets: Closed digital wallets allow customers to add or deduct credits through the issuing merchant only.
• Embedded payments: A few companies are embedding payments, including secured cards, payment installation, and co-branded payment cards. Car manufacturers, for example, work with credit card corporations like Visa to integrate payment with a vehicle voice assistant, allowing car owners to pay for fuel without leaving their cars. 
• Buy now, pay later (BNPL): When a shopper opts to use a BNPL option rather than use their debit card, they are essentially taking out a loan to cover their purchase. BNPL products have a variety of customization options depending on the product, merchant preferences, and analytics on the customer profile.

 

With more customer data and better financial relationships with your customers, companies can use embedded finance to acquire, retain, and increase customer lifetime value while generating revenue in new ways.

 

Embedded finance and customer loyalty

Embedded finance is also ideal for loyalty programs and increasing customer loyalty. Plastic loyalty cards are too easily lost or forgotten; digital loyalty programs embedded directly allows customers to make use of rewards instantly. Push notifications can be used to engage customers with further offers, rewards, and new products.

 

Loyalty programs also incentive further purchases and help generate additional revenue streams via the interchange fee earned with every card tap. 

 

Finally, embedded finance helps a company improve overall customer stickiness; once they find a seamless, user-friendly experience, customers are more likely to be loyal to that brand.