With the market size for embedded finance projected to grow at a compound annual growth rate (CAGR) of 29% from 2023 to 2032, and 41% of U.S. businesses adopting embedded finance to create new revenue streams, this innovative approach is gaining significant attention today.
The COVID-19 pandemic has notably accelerated the adoption of embedded finance. In 2022, the market size for embedded finance exceeded $58 billion as businesses rapidly digitized their operations, leading to a surge in the integration of financial services into various platforms.
Whether you operate a brick and mortar store, an e-commerce platform, or both, this blog post is tailored for you. Stay tuned as we unveil six effective strategies to implement embedded finance in your retail business.
Benefits of Embedded Finance Strategies
First things first: Why are today’s retailers betting big on embedded finance? The benefits are substantial, so let’s explore the key advantages:
- Elevated Customer Experience: Embedded payments streamline the checkout process, making transactions faster and more convenient for customers. This can boost satisfaction and reduce abandoned carts in e-commerce.
- Increased Sales: Offering seamless payment options like one-click purchasing or “buy now, pay later” can encourage customers to spend more. When the payment process is hassle-free, they’re more likely to complete their purchases.
- Enhanced Loyalty Programs: Integrating embedded payments with loyalty programs makes it easier for customers to earn and redeem points, fostering greater customer loyalty and repeat business.
- Cost Reduction: Directly embedding payments into platforms can minimize reliance on third-party payment processors, potentially resulting in lower transaction fees and associated costs.
- Enhanced Data Insights: Embedded payments enable businesses to gather more comprehensive data on customer purchasing behaviors. This data can be used to refine marketing strategies and optimize overall operations.
Now that we understand the benefits, let’s delve into how to successfully implement embedded finance strategies in a retail business.
Top 6 Embedded Finance Strategies for Retail Businesses
From streamlining the checkout process—whether online or in-store—to generating extra revenue by offering services such as “buy now, pay later” or insurance plans for purchased items, retailers can greatly benefit from embedded finance strategies. Let’s explore six embedded finance tips that new retail businesses should consider, along with actionable examples to illustrate their effective implementation.
1. Payment Solutions in E-Commerce Platforms
Retailers can directly integrate payment gateways into their e-commerce platforms, enabling customers to complete transactions without leaving the site. This reduces cart abandonment and improves conversions.
Picture yourself shopping for a new pair of shoes online. When you discover the perfect pair and proceed to checkout, you can make the payment directly on the website without being redirected to another payment site such as PayPal. This smooth payment process is because the online store has incorporated a payment gateway into its platform. This is how embedded finance as a payment solution works.
2. Payment Solutions for In-Store Sales
Just as online retailers integrate payment gateways into their e-commerce platforms, brick and mortar stores can now incorporate embedded payment systems directly into their in-store operations. Customers can complete transactions without the need for traditional cash registers or lengthy checkout lines now.
For example, when shopping in a clothing store, you approach a sales associate equipped with a mobile device. They scan your items on the spot, and the total is presented on their device. You can then tap your smartphone or card to complete the payment right there.
The store has integrated a payment solution into its mobile POS system, allowing you to complete your purchase quickly and effortlessly.
3. Buy Now, Pay Later (BNPL)
Retailers can enhance the shopping experience by offering “buy now, pay later” (BNPL) options at checkout, giving customers the flexibility of paying for their purchases through smaller, interest-free installments at a later time.
This strategy not only enables customers to buy what they want now but also helps increase average order values and attract more customers who prefer a more manageable payment schedule. Actually, according to an Adobe Analytics survey, $79 million of the 2023 black Friday sales came from consumers who opted for the ‘Buy Now, Pay Later’.
How does it work? Whether shopping online or in-store, customers can easily select the BNPL option at checkout. After providing some basic information, the BNPL provider swiftly approves the purchase.
Customers can then receive their items immediately, similar to a regular purchase, and instead of paying the full amount upfront, they can opt to pay in smaller, scheduled installments over a few weeks or months.
4. Loyalty Programs: A More Rewarding Experience
Embedding financial services into loyalty programs can enhance their value. By integrating the loyalty program with the payment system, customers can earn and redeem rewards automatically when they make purchases. Customers can enjoy seamless integration of payments and loyalty points, eliminating the need for separate cards or scanning.
Imagine you’re shopping at a grocery store with a loyalty program. When you pay for your groceries using the store’s app or a linked payment card, you automatically earn loyalty points. These points are added to your account instantly, and you can use them for discounts on future purchases. The integration of payment and loyalty systems makes this process effortless.
5. Embedded Insurance: A Convenient and Profitable Solution
Retailers can offer embedded insurance products like extended warranties or product protection plans directly at checkout. Customers can easily add these options with a simple click or confirmation.
When a customer purchases a new smartphone, they may be presented with the option to add an extended warranty that covers accidental damage, theft, and repairs for two years. By simply clicking to add the warranty, the total purchase price increases.
The warranty takes effect immediately after the purchase, providing instant peace of mind for the customer. Meanwhile, the store receives a commission from the insurance provider, enhancing its revenue stream.
6. Financing Options for Merchants: A Boost for Business
Platforms can provide financing solutions to their merchant partners, helping them manage cash flow, invest in inventory, or expand their operations. This is particularly beneficial for small and medium-sized enterprises (SMEs) that may face challenges securing traditional bank loans.
Imagine a small online clothing store using an e-commerce platform like Shopify. The store owner notices a financing option on their Shopify dashboard and decides to apply for a loan. So once approved, the funds are directly deposited into the store’s business account.
The store owner can then quickly invest in new inventory. The store repays the loan with a small percentage of its daily sales, ensuring a manageable and aligned repayment schedule.
Additional Facts and Tech Solutions for Embedded Finances
Embedded finance can enhance customer loyalty, encourage repeat purchases, and ultimately boost revenue. Additionally, the data collected through these strategies can improve marketing efforts, inventory management, and personalized customer experiences.
Beyond these sales benefits, embedded finance also democratizes access to financial services. Particularly focused on small businesses and individuals who might find traditional banking services cumbersome or inaccessible.
To implement this profitable approach, you simply need to leverage the right technologies and be open to new experiences. Therefore, a robust, modern Point of Sale (POS) system that supports diverse payment options and loyalty program capabilities is essential.
Ready to Transform Your Retail Business?
Don’t miss out on the competitive edge that embedded finance can bring to your retail operations. Whether you’re looking to streamline payments, boost customer loyalty, or explore new revenue streams, iPos has the tools you need to succeed.
Get started today with our all-in-one POS system designed to integrate seamlessly with your business. Experience the ease of setup, the power of advanced features, and the peace of mind that comes with 24/7 support—all for a single, affordable flat fee.
Unlock your retail potential now—schedule a free consultation with our experts and discover how iPos can elevate your business to the next level!
