Embedded finance is becoming a significant factor in ecommerce, and it looks like it will be the way of the future for businesses looking to drive online sales. Utilizing it allows merchants to partner with lenders and other fintech companies to improve how payments are handled on their site and increase the number of options at consumers’ disposal.

First, what is embedded finance? Today we will cover the basics to help business owners or sales leaders leverage this technology to drive more leads, achieve higher conversion rates, and higher average order value (AOV).

We will answer:

• What is embedded finance?
• How does embedded finance work?
• How to get started.

Let’s dive in and discuss each in depth.

What Is Embedded Finance?

Embedded finance is the use of financial tools and services by non-financial companies. Some common examples are payment processing tools like Stripe or consumer financing services like those Skeps offers. The backend of these tools is still run by the company that provides it, but the tool is embedded in the store so that consumers don’t have to go to a third-party site for easy payment or funding.

Without embedded finance, payment would be slow and arduous, as most ecommerce businesses don’t have the means to create their own streamlined payment or financing portals. The alternative would be to link out to a third-party site, but this presents a few problems, which include:

• Longer time to purchase
• Security concerns for the customer when being brought to a website they don’t yet trust
• Pulling the consumer out of the merchant’s ecosystem, giving them more reasons to delay or cancel the purchase

By solving all of these issues by embedding the tool to their own website, businesses cast the widest possible net and give consumers the most convenient possible sales experience.

How Does Embedded Finance Work?

In order to accomplish the goals of embedded finance, websites use application programming interfaces (APIs) to allow different sites and apps to communicate on the backend. By integrating these APIs, an ecommerce site can communicate with a payment platform to offer its functionality on the website. 

When the consumer punches their info in on the ecommerce store, that info can be shared with the payment processor. The processor’s backend can handle the processing of the payment and then can send the confirmation back to the ecommerce interface for the consumer. These API integrations are also used for many other useful functions that are standard in online retail, like estimating the cost and time to ship a product.

The information transferred can also be saved by both third parties so that if a consumer shops from that store or uses that payment processor or financing tool again, they can often gain access to one-click payment or autofill functionality.

How to Get Started

While API integrations can embed a number of services, embedded finance typically deals with offering consumer financing to shoppers directly on the online store website. In order to do so, ecommerce store owners should identify a financing partner that provides all of the functionality they will need to capture and convert as many leads as possible.

This means looking for a fintech provider that offers:

• Multiple financing partners to offer a variety of options.
• Fast approvals to get customers their offer instantly.
• Omnichannel functionality for websites, apps, and other sales channels.
• Easily readable and customizable dashboards for analytics to track the effectiveness of the offers.
• Cutting-edge data security to ensure the safety of consumer information.

While many platforms offer some of the options on the list, not many offer all of them. In order to maximize the effectiveness of embedded financing, merchants should ensure they choose the right partner. Luckily, Skeps offers all of these features and more.

Adopt Embedded Financing With Skeps 

Skeps offers a comprehensive, end-to-end consumer financing platform that helps businesses modernize their entire payment process. We go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:

• Installment financing payment plans
• Store credit cards
• Consumer loans and leases

If you’re looking to partner with a forward-thinking fintech company that will keep consumers' eyes on the purchase while offering best-in-class financing, Skeps is the perfect fit.