Embedded finance involves the integration of transaction gateways in platforms, websites, and
applications that primarily offer non-financial services.
They are generally an addendum to their host site with the sole aim of enabling customers to have little or no hitches processing transactions for products and services.
This is carried out with the aid of an application programming interface (API) that fosters communication between two or more systems based on how it is programmed. A clear example of embedded finance is the payment gateway on ecommerce platforms.
Crypto companies, despite offering a form of financial service, can also find a use for embedded finance as there are lots of importance of embedded finance for them.
Also read, Embedded Finance: A Go-to Solution to drive Financial Inclusion
Because in addition to dealing in crypto, their users still carry out lots of other transactions in the fiat currency.
Things like the purchase of cryptocurrency are often done with fiat currency and they should be able to carry out this transaction using either their debit cards, credit cards, or bank transfers without moving platforms.
Therefore, having crypto companies integrate embedded finance will firstly, increase user experience on their crypto platforms.
Having these financial services on their platform lowers the overhead cost for the company as the transaction fee for processing payment on their platform is significantly lower than when conducted on another platform.
Lending service is another service these crypto companies can offer as they can lend to users either in fiat or cryptocurrency and hold either as collateral.
Also, users can get investment options where they use their crypto assets to facilitate and earn profits.
Increased revenue is another importance as there is an opportunity to diversify the activities on their platforms by integrating embedded finance.
This also increases user retention, as the platform becomes a one-stop shop that caters to not just the crypto needs of the users but the rest of their financial needs as well.
Embedded finance for crypto companies also brings about an expanded customer base, due to the availability of these other financial services on their platform, users who do not primarily deal with crypto can still use these platforms as it meets diverse financial needs.
By integrating embedded finance in their crypto platform, these crypto companies gain better data insights on their customers as they are able to understand each user’s financial behaviour and tailor services accordingly.
This leads to improved risk management as well for the crypto company as they can also relate to customers based on their credit score. Ultimately, this will save the company, especially from customers who have bad debts.
Additionally, with embedded finance integration in crypto companies’ platforms, there is increased transparency and flexibility as users can visualize all their financial activities easily, their spending, investments, and savings.
Finally, crypto companies should understand that embedded finance has the potential to evolve their activities and open new business models and services.
However, care should be taken to ensure that they work with reliable third-party providers as well as integrate tested and trusted APIs to avoid transaction irregularities.
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