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Adopting embedded finance to unlock ‘Finance of Things’ in Nigeria

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PHOTO CREDIT: Rajashree Rao LinkedIn

With technology now driving financial services and inclusion, embedded finance has just become another innovative way of tech application to further establish an ecosystem for what can be called Finance of Things.

With embedded finance, the ecosystem is characterized with democratized access to various financial services by bridging exclusion gap, and widening use cases for the existing financial access through various platforms other than core financial institutions.

Simply put, embedded finance is about enabling non-financial services companies to provide banking services and other financial offerings.

How Embedded Finance Works

Lately, you might have observed that after making a purchase through an e-commerce website or mobile app, you are immediately served with an offer to insure what you have just bought.

In another instance, the offer comes when you make attempt to get a product online and right on the same platform, you get a loan offer via the same platform.

This has been made possible by the fusion of three parties, namely: the non-fintech business that owns a customer-facing digital platform such as a mobile app or a website.

The second is the financial institutions such as banks, insurance, investment or credit firms that play the dual role providing financial services, and managing regulatory, compliance, and credit risk.

The third party that makes up embedded finance is the infrastructure company. They are the FinTech companies that create end-to-end software tools.

These are Application Programming Interface (APIs) and Software Development Kit (SDKs) that connects financial institutions with the digital platform and enable easy integrations to import functionalities quickly with a mobile or web app.

Values Embedded Finance can Deliver in Nigeria

Apart from sharing with Nigeria its estimated $230 billion global revenue by 2025, there are a wide range of services embedded finance can offer in the country.

Embedded finance has no restriction in its applications by players across various industries and sectors.

According to Ope Adeoye, Chief Plumber at OnePipe, embedded finance solutions are ready for deployment within days and do not require building from scratch.

He said that OnePipe, a leading embedded finance solutions provider, makes it possible for non-financial institutions such as manufacturers and distributors, to offer financial services without becoming fully fledged providers.

Embedded finance creates new line of credit facilities for modern shoppers such that distributors and manufacturers can provide access to a wide range of products for retailers and buyers while the payment is settled later.

Integrated insurance services also ride conveniently on embedded finance. By embedding insurance financing tools, businesses are better placed to deliver insurance quickly.

While embedded finance also offers point-of-service lending to help give loans to businesses seeking to finance larger or more significant purchases; investments and trading are among other offerings non-financial entities are privileged to provide through embedded finance.

Last Line

Just like Internet of Things (IoT), embedded finance is the key to unlock Finance of Things in Nigeria with access to various financial services with just one click on any platform.

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