How to Improve Customer Loyalty and Acquisition Using Embedded Finance?

In the contemporary realm, obtaining customer loyalty has become a formidable challenge. However, what if you could seamlessly integrate monetary instruments into your customer interactions, fostering profound involvement and alluring new users? Introducing embedded finance – a disruptive concept upending traditional methods of businesses’ engagement with their clients.

Embedded finance is about adding financial services directly to the infrastructure or app of an enterprise that’s not related to finance. Imagine a situation where you could settle your ride-hailing fare, split the bill at a restaurant with ease amongst companions, or even garner cashback incentives – all within the familiar framework of your preferred app. That is the power of embedded finance at work.

 

How Embedded Finance Fosters Customer Loyalty

Embedded finance acts as a bridge between your brand and customer loyalty. By directly embedding financial tools into your platform, you are creating a more seamless and rewarding experience. Imagine a loyalty program where points automatically translate into cashback in your app, or seamless bill splitting with friends on your service. Embedded finance improves loyalty by:

• Enhancing convenience: Customers can manage finances, unlock rewards, and make transactions without ever having to switch between platforms.
• Rewarding engagement: Loyalty programs are more enticing if rewards are easy and integrated. Think instant cashback or personalized discounts applied at checkout.
• Providing financial solutions: With embedded finance, you will be able to offer specific financial products tailored to your customers – small loans, buy-now-pay-later options – further solidifying your customers’ connection to your brand.

 

How Embedded Finance Fuels Customer Acquisition

Traditional customer acquisition is costly and slow. Embedded finance is like an adrenaline boost, allowing one to onboard seamlessly with attractive incentives to the new user. Here’s how:

• Frictionless onboarding: Imagine a user signing up for a service and getting instant access to a virtual debit card or financing options, all in the same smooth flow. Embedded finance removes hurdles, enabling a smoother conversion for potential customers.
• Compelling incentives: New users can be tempted with targeted promotions such as sign-up bonuses or cashback offers, delivered right through the embedded financial tools. It makes the deal even sweeter for them to continue exploring all the functionalities on your platform.
• Reaching new markets: With embedded finance, you can reach previously inaccessible customer segments. With financial solutions designed for their needs, you can expand your reach and attract a wider audience.

 

Strategies for Leveraging Embedded Finance

·       Streamline Financial Processes within Existing Customer Journeys

Financial services can be included as part of a company’s main offerings, making things more efficient and less complicated for customers. By incorporating lending, payments, or insurance solutions into the current system such as an app or platform, businesses offer a smooth experience without making customers move through various interfaces. For instance, e-commerce platforms could provide embedded lending solutions during the checkout process. This would let customers apply for and receive financing options without needing to leave the platform which improves convenience while reducing cart abandonment rates.

·       Offer Personalized Financial Products and Services

Embedded finance can be used by businesses to gather useful customer data insights. These findings can help companies provide personalized financial products and services, designed based on each person’s requirements and likes. By studying how customers behave, what they buy, and their financial information businesses can provide them with recommendations for bespoke solutions. These solutions could be tailored investment portfolios to match someone’s risk appetite with specific goals, personal insurance plans that account not only for health but also other factors such as age group or profession type, targeted lending choices perfect fitting an individual lifestyle circumstance (like student loans), etc.

·       Implement Innovative Loyalty and Reward Programs

Embedded finance offers businesses new possibilities to create inventive loyalty and reward systems that encourage customers to participate more and build lasting relationships.

By including financial services in their platforms, companies can provide incentives such as cashback or discounts from a range of options like loans for the next big purchase or embedded insurance coverage, and even other benefits like special rates on accommodations and flights among others.

For example, a travel booking platform might have an incentive program where customers get points according to their expenses. These points could be used for embedded travel insurance, lending choices in preparation for future holidays, or exclusive price reductions on places to stay and airplane tickets. The importance of loyalty programs is highlighted by the following statistics:

• More than 83% of shoppers claim that being a part of a reward program affects their choice to make another purchase. (Yotpo)
• Most customers, who make up 84% of the total, say they’re more likely to remain with a brand that provides some type of loyalty program. (Business Wire)
• The number of consumers who withdraw their loyalty more quickly than they did in the past has risen to 77%. (Accenture)

 

Challenges in Implementing Embedded Finance

• Regulatory Compliance and Security Concerns: Including financial services within non-financial platforms can bring difficulties related to regulations and security. Companies need to follow KYC, AML, and other data privacy laws like GDPR to avoid penalties as well as possible harm to their reputation.
• Integration and Technical Complexities: Working with existing platforms to include financial services is not simple. It includes managing various systems, APIs, and data formats that need expert technical knowledge along with resources and coordination from fintech partners, banks, as well as regulatory bodies.
• Building Trust and Overcoming Customer Hesitation: Customers might be unsure about taking financial services from companies that are not categorized as financial institutions. Such companies need to educate their customers about the benefits and safety aspects, show them a history of reliable service, clear up any worries about privacy, and offer information on how data is used and protected.

 

Conclusion

Embedded finance offers the potential to revolutionize customer interactions by seamlessly incorporating financial instruments. This can lead to greater loyalty through convenience, personalized incentives, and tailored fiscal solutions. Additionally, embedded finance simplifies customer acquisition with effortless onboarding and focused inducements. While there are challenges related to regulatory compliance and technical complexities, the potential benefits of incorporating finance into business operations make it a highly alluring tactic for companies aiming to cultivate a devoted and flourishing customer following.

Having worked for more than a decade with financial institutions, third-party payment processors, and fintechs, Verinite is your trusted guide on your digital transformation journey. Deep domain expertise, technology know-how, and application-level expertise empower us to deliver a differentiated project delivery experience and unprecedented levels of performance. Do not let this opportunity slip away to use embedded finance for competitive advantage. Contact Verinite today, and our experts will assist in embedding financial services seamlessly in your offerings to retain customers, acquire new customers, and drive your business to new heights of success.