• James Butland, Managing Director UK at Mangopay


• 04.02.2025 02:17 pm

Why has embedded finance become a must-have for businesses?

A high inflationary market and financial instability continue to challenge traditional businesses, but platforms are adapting. In the last decade, platforms have diversified, branching out beyond e-commerce to include travel, on-demand services, fintech services and are now an important way to meet the growing demand, and further personalise experiences for customers. 

Beyond diversification, we’re also seeing increased integration between different industries, such as fintech with retail or on-demand services and delivery services with restaurants.

Embedded finance underpins this evolution. Some platforms are partnering with Buy Now Pay Later (BNPL) companies to make high-cost products and services more accessible to a broader audience. On-demand platforms such as food delivery and ride-sharing services are introducing financial service branches aimed at providing tailored financial products and services to their users. These offerings often include digital wallets, real-time earnings tracking, and cashback rewards.

By integrating embedded experiences into day-to-day services, businesses can grow and reach a broader audience while reducing customer acquisition costs. 

What does the rise of embedded finance mean for traditional financial institutions?

Embedded finance is reshaping the financial landscape, by allowing non-financial platforms to deliver services that were once the exclusive domain of traditional banks. With 42% of UK consumers using digital wallets for online merchant payments, and younger generations like Gen Z (19%) and millennials (12.5%) embracing them for peer-to-peer transactions, the demand for integrated, user-friendly financial tools is surging.

Traditional financial institutions now face significant pressure to adapt. While they remain trusted for large-scale and complex transactions, their relevance in day-to-day financial interactions is waning as consumers turn to platforms offering seamless, embedded solutions.

To compete, businesses must adapt by adopting embedded finance strategies or partnering with fintech providers. This approach can help them retain market share and meet modern consumer expectations for convenience and personalisation.

How is embedded finance transforming the way businesses approach consumer loyalty?

In a competitive market, loyalty is critical for differentiation. However, building loyalty isn’t as straightforward as it once was. Consumer expectations are continually being shaped by seamless digital experiences and, as a result, loyalty can’t be won by rewards programmes or special offers alone.

Many tackle this challenge by adding more digitised steps to the process, but in reality, the whole experience must be evaluated. Embedded finance plays a key role by integrating tools like wallet infrastructures, simplifying payments, building trust, and encouraging users to stay within the ecosystem. Platforms, and online businesses in general, have recognised that account-based ecosystems drive a strategy for sustainable growth. These ecosystems, centred around registered members, increase the chances of user engagement and repeated transactions. Platforms that reimagine loyalty through embedded solutions are better positioned to foster deeper connections with their customers.

Loyal registered members, in turn, enjoy various benefits such as access to exclusive products and services, discounts, and other perks. Loyalty programmes make these memberships even more attractive by helping platforms expand their customer base and increase customer lifetime value.

What advantages does a wallet infrastructure provide to platforms in managing multi-party transactions?

A wallet infrastructure streamlines the complexity of multi-party transactions by offering a centralised and programmable system for managing funds. Platforms can create multiple wallet accounts for various purposes, such as user payments, commissions, and platform fees, ensuring financial transparency and improved operational management.

This setup simplifies the movement of funds across multiple parties, allowing platforms to support features like split payments, currency conversions, and real-time earnings tracking. Moreover, wallet infrastructures enable platforms to deliver a localised payment experience by handling transactions in users' preferred currencies.

By integrating wallets, platforms reduce reconciliation efforts, save on transaction costs, and unlock new revenue streams, all while building user trust and increasing user retention.

How are wallet infrastructures helping businesses unlock growth opportunities?

Stored value is a key growth enabler.  By allowing users to retain funds within the platform’s ecosystem, businesses not only encourage repeat usage but also unlock revenue opportunities through mechanisms like interest generation, currency conversion fees, and transactional charges. Stored value also encourages consumer loyalty, as users are more likely to stay engaged with platforms where they’ve already deposited funds.

Wallet infrastructures also help to reduce transaction costs by bypassing traditional banking systems, enabling payments through digital wallets rather than cards or costly alternatives. This, coupled with its adaptability, positions platforms for scalable and sustainable growth.

How does a wallet-based ecosystem contribute to sustainable growth for platforms?

Sustainable growth is driven by account-based ecosystems centered on registered members. These users engage more frequently and benefit from perks like exclusive access, discounts, and loyalty programmes, which expand the customer base and increase lifetime value.

Wallet infrastructure supports this ecosystem by creating a secure, unified space for managing transactions and finances. This creates a loyal, engaged community, paving the way for long-term growth.