As the pandemic begins subside, businesses of all sizes are starting to explore the future of retail – one where in-store and online shopping are one sophisticated experience anchored in part by embedded finance, writes Roy Zakka (pictured) , CEO and Founder of Layer

Over the past two years, the Covid pandemic prompted many businesses to rethink and accelerate their digitisation strategies. Consumer expectations are evolving fast and companies in all sectors are having to respond to meet the desire for more innovative experiences.

Nowhere is this more evident than in the retail sector, where the conversation has moved from simply being able to sell online to having a sophisticated omnichannel presence that will promote increased loyalty and higher spending.

An obvious place to start for retailers is the potential to offer financial services through embedded finance. Firms are able to move at pace by partnering with a third-party fintech provider, whose services can be easily integrated with their existing customer databases. This enables them to bring a solution to market relatively quickly, without having to invest a serious budget in software development. 

Embedded finance offers a number of advantages for retailers, including an opportunity to increase customer retention, improve engagement and enhance lifetime value. There’s also the prospect of opening up new revenue streams at a comparatively low cost. For example, if a brand can offer a card product through their commerce journey, there’s an opportunity to make money on the interchange or other account fees.  

The potential benefits of embedded finance go much further too.  Broadly speaking, embedded finance has the potential to allow every company to become a fintech company. Whether you’re Nike or ASOS, or a much small retailer, it is now possible to offer financial services as part of the customer journey.

Companies are increasingly waking up to this potential. According to research by Juniper, the market value of embedded finance service is predicted to reach $138 billion by 2026. It’s clear that this isn’t just a financial fad – it’s the future.

The data opportunity

In today’s omnichannel environment, in which customers are interacting with products and services across a wide range of touchpoints, brands can accumulate a huge amount of data

on their customers (providing. of course, that consent has been achieved in a compliant manner). But is this data actionable? While most online businesses are ahead of the curve in terms of managing their data (often outpacing financial institutions in that respect), not all have the resources to properly leverage that data to its full financial capability. It is as if their data warehouse is stocked with inventory they cannot move. Yet the opportunity in doing so is significant.

Unlocking the financial potential of this data is a core part of implementing a successful strategy through embedded finance. All a company requires is a solution that will help them bridge the gap between the mass of customer data collected across multiple touchpoints and the application of that data to financial services that match the customer experience. 

Failing to understand how to correctly leverage data means brands often venture into financial services in an inauthentic way. The result is that they end up striking a false note with the very customer they are seeking to charm. An example of how a firm might get it wrong would be a boundary-pushing fashion retail brand deploying a financial service that feels corporate and impersonal, confusing the end-user with offers that don’t feel relevant. By contrast, smarter brands map the data they collect to strategies that increase brand loyalty and customer value. 

Ride-sharing app Uber is a well-known example of embedded finance in action. Uber customers no longer need to use a card or cash to pay for their trip but instead complete their transaction via the Uber app once the ride is over. 


Segmentation Brings Value


Segmentation lies at the heart of embedded finance. Because the platform integrates seamlessly into a business – sitting on top of the organisation’s existing tech stack, the transition from analysis to action is much smoother and more effective as it doesn’t require the diversion of resources or budget from day-to-day operations.

Having the ability to dig deep into data allows a brand to segment its customer base by a whole host of criteria, including interests, location, and purchase history. Through a segmentation engine, the retailer is able to mine, categorise, and target data which results in the personalisation of services and advertising. In turn, that stimulates the engagement required to upsell, cross-sell and win back lapsed customers.

As the pandemic finally begins to subside, smart retailers are already integrating embedded

finance into their digital strategy. Those who are not risk being left behind.

Roy Zakka is the founder and CEO of fintech company Layer, which works with banks and other businesses to digitalise their offering. To learn more, please visit wearelayer.com