The rapid evolution of Fintechs in the last couple of years has contributed to impressive advancements in the financial services space, such as the speed of transactions, day-to-day management of current accounts, and straightforward onboarding processes, payment experiences and journeys. Now that the industry has reaped the benefits of technology, Fintech companies have started to take advantage of other industries, merging them into their own ecosystem to improve customer experience and reach.
Payment middleware Imburse is currently seeing huge demand and interest from the financial services industry in incorporating new services into their current offerings and processes. The need for these embedded services and straightforward, N-in-1 journeys comes when technology adoption is more significant than ever. In 2020, two billion people shopped for goods online (Statista). Digitalisation isn’t just a passing trend that the recent pandemic propelled – it is a phenomenon that’s here to stay. According to a McKinsey survey, 65% of insurance policyholders plan to use digital services as much or more than they were during the covid-19 pandemic. An equally high 82% of respondents plan to use banking digital services as often or more often in the future.
Customers are moving to digital for their everyday tasks, and they are looking for smooth experiences that are tailored to their needs. For instance, with embedded finance, customers can now book holidays through their bank account through travel partners or subscribe to media content distributors through their bank. Embedded finance across sectors is the next big step to revolutionizing customer journeys and empowering companies in any industry.
Statistics speak for themselves, as the market for embedded finance is currently valued at $54.3 billion and is expected to reach $248.4 billion by 2032 (Future Market Insights). Embedded finance also covers various crucial sectors such as insurance, payments, and lending, making it incredibly impactful worldwide. Embedded payments, for instance, enable customers to save their card details on a website and instantly pay for their products next time, with a click of a button. Customers can also use their digital wallets to pay for goods, avoiding pulling out their cards and manually adding their details.
Embedded insurance is another major subsector that enables customers to buy insurance for the product they were purchasing at the point of sale without leaving the website. Rather than, for instance, purchasing a mobile phone and then searching for the best insurance policies for their new phone, customers can buy both the products and the insurance to cover them at the same time. Another widespread use case can be found in the travel industry, as it is now common to be offered travel insurance when booking flights online.
The digitalisation of insurance in Europe has grown 35% in 2020 alone, as digital transformation becomes a priority for this sector. Experts predict that fully embedded Property & Casualty insurance policies distributed through other channels will generate $140 billion in Gross Written Premium by 2030 (McKinsey). The market opportunities are plenty when it comes to embedded insurance, and they benefit both customers and insurers.
Purchasing insurance is considered a necessity – not necessarily something customers want to do, but something they have to do. Thus, searching for insurance policies can be overwhelming and time-consuming. Embedded insurance brings customers the ease and convenience they want, enabling them to get the protection they need with little to no effort. This makes insurance much more appealing to customers and removes the challenges of finding the right policy.
Insurers highly benefit from embedded insurance too, as they can get their products out there in various channels for a fraction of the distribution costs they would traditionally have. It is estimated that the cost of distributing insurance products represents 50% of the total industry costs (Simon Torrance). Embedded insurance creates more opportunities to reach different markets and target wider customer bases, all while lowering these costs.
Moreover, insurers can gather all the relevant customer data collected by the website. They can then use the data to find the most suitable policy for each case. This ensures that their future customers are offered relevant policies tailored to their needs, increasing the potential for conversion. Embedded finance proves that technology and partnerships are vital to succeeding in any industry.
Large enterprises that rely on traditional systems and processes have a more challenging path ahead. However, solutions like Imburse, a cloud-based payment middleware that offers connectivity to the entire payments ecosystem, allow them to rapidly modernise and future-proof their systems for a fraction of the costs, time and resources. Partnering with such providers enables enterprises to reach the level of digitalisation they want and adapt to the current market.