Why embedded finance experience is of utmost importance to Asia Pacific’s post COVID-19 digital era

As lives return to normalcy around the world, I share my thoughts on why embedded finance experience is of utmost importance to Asia Pacific’s post COVID-19 digital era.

Since the Covid-19 pandemic has put us through a series of lockdowns, the whole world, especially the Asia Pacific region, has seen an exponential rise in online spending.

With millions of new online shoppers since the start of the pandemic, on top of the ever growing consumers’ expectations of an optimal digital customer journey, we are now seeing the emergence of a world of richer finance experiences with the brands people love.

Embedded finance experiences offer brands a wide range of valuable benefits including increased frequency of consumer interaction, greater loyalty and spend, and deeper, data-driven, customer relationships.

Increasingly, we are observing how e-commerce platforms are providing a buy-now-pay-later (BNPL) option, ride-hailing apps offering insurance, or even used car digital platforms offering car loans and insurance. These are all designed to streamline financial offerings for consumers by making it easier for them to access the financial services they need, and more importantly, when they need it.

As consumer behaviour drives finance, for nonbank brands and businesses, embedding finance within their ecosystem will help deliver relevant finance experiences to drive customer engagement and loyalty, which will lead to new business models and revenue opportunities.

As embedded finance will be worth a mind-blowing $7.2 trillion by 2030, coupled with a relatively younger and digitally-savvy population with one of the highest smartphone penetration rates globally, the Asia Pacific region is primed for tremendous growth in the post pandemic world.

Richer finance experiences

The digital attention economy has disrupted how brands and their customers connect, driving up the demand and expectations for greater speed, convenience and personalisation. Minimally, brands need to accept the reality that consumers are willing to abandon transactions (also known as shopping cart abandonment) without second thought, if they experience any delay or inconvenience. Embedded finance effectively removes such pain points — such as the need to seek financial services outside of your ecosystem.

More importantly, most consumer brands have a transactional relationship with their customers. They rarely engage with their customers after an initial purchase and so the relationship is transient, or even non-existent. Brand equity and reputation are built on relevance, and continuous relevance breeds customer loyalty and increasing wallet share (also called revenue!). This goes beyond just having a membership programme.

The importance of finance offerings to consumers offers nonbank brands an opportunity to go from intermittent interactions to constant connection. At the same time, customers want to consume more with the brands they love.

If brands want to trigger meaningful and continuous value exchanges with their customers to increase consumptions, they need to create finance experiences.

Opening access to financial products and services

When nonbank brands start embedding finance to enable richer finance experiences for their customers, this increases the ease of use of accessibility significantly, given that approximately half of Southeast Asia’s population remains unbanked, with no access to financial products and services. Such inaccessibility in the region has set the tone for the rise of financial offerings by fintech startups and nonbank brands.

Another key reason is the high barrier to entry for traditional financial and banking services. In many countries within the region, it has been observed that even opening a bank account can be a tedious and complicated process, often accompanied by substantial fees incurred. Having fintech startups and nonbank brands focused on providing embedded finance experiences (even as simple as e-wallets or the BNPL option) is a game-changer for financial inclusion. Crucially, it is democratising access to finance.

Standing out from competition

The pandemic has accelerated the disruption and consumer expectations. Embedded finance looks set to serve as a means in transforming industries where the delivery and user experience has to be redesigned, with finance experiences taking centre stage. Businesses that can provide the most relevant and richest finance experiences will stand out and leave the competition behind in the year ahead.

As a world-leading embedded finance experience platform, Railsr believes that the embedded finance economy is a fundamentally different way of creating relationships between companies and consumers — we are passionate about enabling brands to build relevant finance experiences to drive customer engagement and loyalty.

Connect with our APAC team or visit our website as we are excited to partner with brands to co-create amazing embedded finance experiences that strengthen your customer relationships and enjoyment — as our next big step in delivering category-defining products and partnerships into the APAC region.