The ability to order products and services and make payments on a platform or app is enabled by embedded finance. It is therefore the integration of financial services in fundamentally non-financial platforms.
Small and medium-sized enterprises (SMEs) play huge roles in the economy of a country and the aggregation of these affects the economy of a continent.
Africa’s economy is greatly influenced by SMEs. Embedded finance has the potential to support SMEs in various ways that would improve their processes and help them survive in the market.
One such support is offering SMEs financial management tools with which they can carry out tasks like invoicing, and expense tracking among others.
SMEs in addition to these tools can also integrate payment gateways enabled by embedded finance into their platforms.
Together, this simplifies and streamlines financial operations for these SMEs and gives them increased transparency as they can easily access their financial data and visualize their financial performance.
Insights that aid make informed business decisions can be drawn from this data. Embedded finance can also enable SMEs to offer flexible payment options for their customers, services like buy now, pay later (BNPL). This enhances customer experience and improves customer retention.
Also read, Embedded Finance: A Go-to Solution to drive Financial Inclusion
Research has shown that lots of African SMEs fail due to lack of access to funds, embedded, finance can provide SMEs with the support to access funds they need to run the business through alternative sources. An example is peer-to-peer lending, which is easier to access and manage.
Additionally, it is easier for SMEs to scale and even expand into new markets with the aid of embedded finances.
As it would facilitate seamless cross-border transactions for these SMEs and other financial processes. SMEs leverage these support-embedded finance offers, which would enable their growth, sustain them and eventually accelerate their businesses. This will ultimately contribute to the growth as well as the development of the African economy.
This doesn’t mean that there are no challenges to integrating embedded finance in Africa, there are lots of them, but being intentional will help SMEs navigate these challenges while collaborative efforts will go a long way in mitigating the challenges and improving the situation.
As an SME business owner, you owe it to your business to give it your best, research, and explore different embedded finance tools and solutions you can implement in your business.
Understand the inner workings, cost of setting up and operations, and associated risks among others.
Remember, starting small is still a good business strategy. It allows you to test with minimal risks and when it turns out successful, you can now scale the use.
Ensure that whatever solutions are being adopted by the business are prioritizing customer experience.
Finally, seek and build partnerships, this could be with a fintech firm or even with another SME as long as the businesses do not compete and the business goals align, go for it.
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