Over the last several months, we have witnessed this transition in dramatic fashion. Large tech platforms from Grab to Mercado Libre are become financial services companies, leveraging their unique position as trusted partners with unique insights into the cashflows of their customers to provide financial products. But, perhaps more exciting, we are seeing a whole new generation of platfins – non-financial services companies like SokoWatch in Kenya… and Jumbotail in India that are solving core distribution and logistics problems first… and layering relevant financial services on top. These companies are embedding financial services into specific use cases — assisting end customers in achieving a goal through access to financial services rather than looking at these services as an end product.
Many of these platfins are themselves being forced to reckon with the complexity of offering financial services, whether embedded or not. Sometimes these offerings are developed in-house by an internal staff working through bank partnerships. Other times, the strategy is outsourced, with the platform finding a fintech enabler to frictionlessly add financial services — a lender, insurer, or investor “as a service.”
… One big advantage of fintech’s movement toward embedded finance is that transactions are seamless and available at the touch of the button. There has been much written about the benefits of making services nearly invisible — the grease that allows the wheels of commerce to grow. However, for true embedded inclusive finance to occur, the financial products need to be visible as well as embedded. Consumers and small businesses, many of whom may be unwittingly engaging with financial services for the first time, need to know the implications of using them — the price, the terms, the data being used.
Platfin and IaaS businesses are the key players in the next stage of inclusive finance. But these new players’ degree of separation from finance is not an excuse for them to play hot potato with the responsibility to create impactful and inclusive products. We will only move toward a more inclusive world if these companies really focus on embedded inclusive fintech.