Embedded Finance Firms Are Enabling Frictionless Interoperability Between Payment Rails – Report

Given the scope of payments being made on a global scale, with each country and region having its own respective payment rails, embedded finance companies have stepped up to enable seamless interoperability between payment rails. This, according to an update shared by the team at Juniper Research.

This is now reportedly being seen in the form of cross-border payments “through embedded financial services, such as from major players like Balance or Marqeta.”

Juniper Research further noted tha these companies utilize payment rails “including SEPA, CHAPS, BACS, ACH, and SWIFT in order to facilitate instant payments on a domestic and global scale.”

Additionally, the use of multi-rail payments “means that even more payment methods are acceptable for transactions, reducing the likelihood of cart abandonment within eCommerce contexts.”

A result of this has been the surge of various business models within the embedded finance ecosystem, including BNPL and digital wallets, “both providing increased flexibility in purchasing through preferred methods.”

According to Juniper Research, these are likely “to rise in the coming years as embedded financial services become optimized and increasingly prevalent, in addition to becoming more normalized within society, especially in the case of BNPL, which is seeing increasing discussion of regulation across key markets.”

The common theme amongst partnerships in these particular areas is “that there are new opportunities for banks to capitalize on, whether through increasing the scope of clients or potential earnings through existing clients.”

A benefit to traditional banks entering the embedded finance fray is “that for some, this legitimizes the concept of embedded finance, whether it is for businesses that believe they will have added protections by utilizing banks over third parties, or consumers who might be more inclined to use non-traditional payment methods such as BNPL over credit cards.”

Ultimately, more banks need to “form partnerships to enter the embedded finance ecosystem, but as they do, the opportunities for growth for both banks and the market itself will become evident.”

Juniper Research also mentioned that AI (Artificial Intelligence) and ML (Machine Learning) adoption has boomed in the past few years, with “the development of these technologies being drastic within the past year alone.”

The report added that emerging applications of AI and ML “within embedded finance include risk assessments, fraud detection, and personalization. Generative AI is being used to create synthetic test data for training models and evaluating systems, especially by mirroring fraudulent patterns.”

As stated in the update from Juniper Research, this means that it “is possible to generate data that simulates the characteristics and behaviors of bad actors, thus allowing companies to create more realistic scenarios for testing and therefore optimizing fraud detection capabilities for embedded financial services.”

In addition to fraud prevention, generative AI is being increasingly seen in the form of chatbots, “providing personalized financial support for customers utilizing embedded financial services.”

As the capabilities of these technologies grow, the opportunities for embedded
finance will develop alongside it.”

It is forecast that embedded finance revenue will “reach $228.6 billion by 2028, a total
growth of 148% from a 2024 figure of $92.2 billion and a CAGR of 25.5%.”

This increasing market maturity and consumer confidence,” supported by regulatory
initiatives and greater acceptance, particularly within B2B use cases.”

New advances within embedded finance are driving growth within specific use

For example, multi-rail payments are becoming more prevalent “with embedded finance players like Balance and Marqeta aggregating numerous Open Banking APIs to enable more seamless and cheaper payments across scenarios such as bulk disbursements or cross-border payments.”

Embedded insurance as a segment experiencing a surge in adoption globally; increasing 125% from 2024-2028.

Offerings are increasingly available “for many eCommerce platforms, with the convenience provided incentivising consumers to take out policies mid-checkout.”

Asian Pacific governments, including Singapore and Malaysia, have “been promoting the uptake of digital insurance for consumer and commercial use.”

The conveniences provided through embedded offerings “will garner the segment significant growth across the region.”

However, embedded insurance is still “an uncommon offering from many leading vendors, despite the significant growth potential,” the Juniper Research report concluded.

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