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Embedded finance in the age of e-commerce

Paul Selibas - Head Software Engineering Ukheshe

The African online e-commerce market has grown rapidly in recent years and is estimated to be worth approximately $40 billion – a figure that will likely increase by 66% by 2027. Consumers value the convenience, time savings, and discounts online shopping can provide, while businesses gain advantages such as overhead savings, data insights, and a wider customer base.

And behind all these benefits, embedded finance has quickly become the backbone of e-commerce and its astounding growth trajectory.

What is Embedded Finance?

“Embedded finance refers to the integration of financial services such as banking, insurance, or lending into non-financial companies’ products and services,” explains Paul Selibas, President: Project Engineering at local fintech enablement partner Ukheshe.

Examples include online checkouts with embedded payment options to avoid external payment sites or offering add-ons like insurance and extended warranty purchases within the checkout process. Says Selibas: “When consumers pay for an online grocery cart or book a service on a ride-hailing app, they don’t often consider the feats of engineering happening in the background. Their checkout process occurs instantly due to technical operations like embedded finance creating a seamless experience. In essence, it offers consumers a much better value proposition, saving them costs, time, and effort. In turn, businesses benefit by unlocking new use cases and revenue streams, increasing customer retention, and bolstering sales.”

Embedded financial services such as ‘buy now, pay later’ options, for example, can increase conversion rates by as much as 30% and reduce the number of abandoned shopping carts. Tesla CEO Elon Musk has even hinted that embedded financial services such as insurance could become a key source of revenue for the motor industry, providing up to 40% of future sales value.

And embedded banking loyalty programmes, powered by BaaS, can allow customers to immediately earn rewards or cashback when making purchases with their loyalty card or app. Starbucks’s rewards platform, for instance, has more than $1 billion of funds stored by users within the platform – that’s more than 85% of US banks have in assets.

“Integrating financial tasks into non-financial activities creates a profoundly different market, with many more opportunities for partnerships and new revenue streams,” says Selibas. “It’s a win-win for both business and customer, generating value for businesses through direct revenue or new opportunities, while making customers’ lives easier by increasing convenience or addressing potential pain points. Embedded finance is one of the biggest trends in the fintech space and is dominating discourse for good reason.”

This is evident in the exponential growth of the market: According to a Juniper Research whitepaper, the value of the embedded finance market will exceed USD$138 billion in 2026, from just USD$43 billion in 2021. Not to mention the fact that every major tech company is in on the action – Facebook, Apple, Google, Microsoft, and Amazon all offer various payment options and add-ons. Even traditional financial institutions such as banks, while threatened by this shift in economics, are tapping into the tremendous growth potential by partnering with fast-moving fintech companies.

And for any player looking to enter the embedded finance space, partnerships are the way to go. Accenture’s Global Business Perspectives on Embedded Finance 2021 survey showed that for those already implementing embedded finance solutions, 70% said they are using partners, buying, and licencing technology as part of their embedded finance strategy.

“Partnership is at the core of embedded finance,” says Selibas. “For companies still thinking about offering financial solutions, it’s crucial to identify reliable partners who will not only lead and guide them through the initial process but will also become collaborators who are willing to help them overcome any challenges they may face or find creative new strategies and solutions they can implement.”


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