Embedded Finance: How Non-Financial Companies Are Integrating Financial Services in India

January 14, 2025 | by Sonika Thapa

In India, the digital landscape has undergone a seismic shift over the past decade, with technology shaping industries and creating new opportunities. One of the most innovative and disruptive trends that have emerged in the Indian market is embedded finance. This phenomenon refers to the seamless integration of financial services such as loans, insurance, payments, and investment products into non-financial platforms. In simpler terms, it allows consumers to access financial services directly within the apps or platforms they already use, such as e-commerce sites, ride-sharing apps, or online food delivery platforms.

As India becomes increasingly digitized, embedded finance is gaining traction and revolutionizing the financial sector, especially with the rise of fintech startups, mobile wallets, and government initiatives like Digital India. This shift is fundamentally changing how Indian consumers access and interact with financial products.

What is Embedded Finance?

Embedded finance is the integration of financial services into non-financial platforms—platforms that are not traditionally associated with the finance sector. These could be e-commerce websites, food delivery apps, ride-sharing services, or even social media platforms. Essentially, it allows consumers to access financial products, such as loans, insurance, or payment services, directly within the platform they use without needing to step into a traditional bank or financial institution.

In India, embedded finance is rapidly becoming part of everyday transactions. For example, when an Indian consumer buys a product on an e-commerce website, they might be offered the option to pay via Buy Now, Pay Later (BNPL) services. Similarly, ride-sharing apps such as Ola or Uber might offer drivers access to microloans or insurance coverage tailored to their needs, all integrated within the app they use regularly.

How Non-Financial Companies Are Leveraging Embedded Finance in India

Non-financial companies in India are tapping into the embedded finance trend to offer services that traditionally belonged to banks or insurance companies. These companies leverage their existing platforms and vast consumer data to provide personalized financial products directly within their apps. Let’s look at how some of the key industries in India are adopting embedded finance:

E-commerce with Payments & Lending

India’s e-commerce giants, such as Flipkart, Amazon India, and Myntra, have integrated embedded finance into their platforms by providing payment solutions and lending products. For instance, Flipkart’s Pay Later service uses the Buy Now, Pay Later (BNPL) model, enabling customers to shop now and pay later, which enhances accessibility and offers greater financial flexibility. Additionally, platforms like Shopify India and Amazon’s Seller Financing are offering embedded loans to small businesses and merchants, providing working capital based on sales and performance metrics, thereby simplifying access to credit without the need for traditional financial institutions.

Ride-Sharing Apps and Microinsurance

Ride-sharing platforms like Ola and Uber India have expanded their services to include embedded finance, offering products like microinsurance and vehicle loans for drivers. Uber, for example, provides drivers with personal accident insurance while they are on the job, and drivers can also access loans to help them purchase vehicles through the platform’s financing partners.

In India, where access to affordable insurance is often limited, ride-sharing platforms have become critical touchpoints for offering insurance coverage. These embedded financial products not only serve the drivers but also enhance the overall customer experience by making travel safer and more secure.

Embedded Payments & Mobile Wallet Solutions

Payment solutions like Google Pay, PhonePe, and Paytm have been instrumental in driving the growth of embedded finance in India by enabling users to make fast and secure payments for everyday transactions such as groceries, utility bills, movie tickets, and ride services. These apps have also expanded their offerings to include financial services like peer-to-peer lending, investment products, and insurance options. For instance, PhonePe provides access to mutual funds and insurance, while Paytm integrates microloans and savings programs into its platform, making financial services more accessible to a broader population, particularly those without a bank account or credit history.

Subscription Services and Embedded Insurance

Streaming services like Netflix, Disney+ Hotstar, and Amazon Prime Video are increasingly incorporating embedded finance in India as they expand their offerings beyond subscription-based entertainment. These platforms, which have experienced significant growth, are exploring ways to provide users with financial products such as insurance or digital health services. For example, an Indian subscriber to Netflix or Amazon Prime could be offered a subscription-based health insurance policy as an add-on, with payments integrated into their monthly fee. This approach not only adds value for customers but also provides these platforms with new monetization opportunities.

Digital Platforms for Investment Products

Financial inclusion has been a challenge in India, but the rise of fintech is changing that. Platforms like Groww, Zerodha, and Upstox are making investments in mutual funds and stocks accessible without traditional brokers. Embedded finance is key, offering users easy access to investment tools directly within apps. Additionally, digital lending platforms like MoneyTap and Cashe provide personal loans or credit based on transaction history, further improving financial accessibility in India.

The Growing Role of Embedded Finance in Daily Life in India

Embedded finance is not just a buzzword in the fintech world; it’s already becoming a regular part of Indian consumers’ daily lives. From buying groceries to paying utility bills, embedded finance is changing how consumers engage with financial services. Here are some ways it’s already influencing daily life in India:

Cashless Payments Across Platforms

With the rise of mobile wallets and UPI-based services like Google Pay, PhonePe, and Paytm, cashless payments have become the norm for millions of Indians. These platforms allow users to make payments for groceries, utility bills, movie tickets, and even local transportation using a smartphone.

Furthermore, these payment apps have embedded lending and insurance services, such as offering personal loans or health insurance directly in the app. For example, PhonePe offers Pay Later options for users, which allow them to make purchases and pay back in installments. This integration of financial services has made payments not just easier but also more flexible.

Embedded Loans for Products and Services

With the rise of BNPL (Buy Now, Pay Later) services, Indian consumers now have access to financing options for everything from electronics to household appliances. Amazon Pay Later, ZestMoney, and Simpl are some popular services offering BNPL to Indian consumers. This has become especially important in India, where credit card penetration is still low, and many consumers are opting for alternatives that allow them to split payments over time.

Embedded Finance in the Gig Economy

India’s gig economy, encompassing drivers, delivery personnel, and freelancers, is seeing a significant impact from embedded finance through platforms like Swiggy, Zomato, Uber, and Ola, which offer integrated financial services such as microloans, insurance, and savings plans within their apps. For example, an Uber driver in India might receive health or accident insurance through the app, along with a small loan to cover vehicle maintenance or medical costs. These services offer crucial financial support to gig workers, who often lack access to traditional financial services.

Health Apps Offering Financial Solutions

The health and wellness sector in India is growing rapidly, with apps providing fitness tracking, meditation, diet plans, and mental health support, while embedded finance is starting to play a role by offering users access to health insurance or fitness-related discounts. Apps like Fittr or HealthifyMe, for instance, may offer discounted or embedded health insurance packages linked to users’ fitness progress or health goals. This integrated model makes health services more accessible and encourages users to prioritize their well-being while also managing the financial aspect.

Embedded Finance in Travel

Travel apps like MakeMyTrip, Yatra, and Cleartrip are integrating embedded finance to offer consumers financing options when booking flights, hotels, or holiday packages. In India, where travel can often be expensive, these platforms offer EMI (Equated Monthly Installments) payment options for travelers, making it easier for people to plan vacations or business trips without the burden of paying upfront.

Benefits of Embedded Finance for Indian Consumers and Businesses

For Consumers:

Greater Convenience

Embedded finance significantly simplifies financial transactions by allowing consumers to access a variety of financial services directly through the platforms they already use regularly. This removes the need to switch between multiple apps or websites, making financial management more efficient and time-saving.

Customized Financial Solutions

Through embedded finance, businesses can offer more personalized financial products tailored to individual consumer needs. Whether it’s providing loans, insurance, or payment services, these personalized solutions ensure that products are more relevant and suited to each customer’s unique financial situation.

Better Financial Inclusion

By integrating financial services into commonly used platforms, embedded finance plays a crucial role in improving financial access, especially for underserved communities in rural or remote areas. This helps bridge the gap for individuals who may not have easy access to traditional banking, thereby enhancing overall financial inclusion.

For Businesses:

New Revenue Streams

With embedded finance, businesses can expand their offerings by introducing financial products like loans, insurance, or payment processing services. This opens up new revenue opportunities, allowing businesses to earn additional income through transaction fees, interest, or commissions tied to these financial services.

Enhanced Customer Retention

Providing embedded financial services can boost customer loyalty by offering a seamless, integrated experience. When businesses offer financial products within their existing platforms, they foster deeper customer engagement, keeping users within their ecosystem, which ultimately increases retention rates and customer lifetime value.

Competitive Advantage

By incorporating embedded finance into their service offerings, businesses can set themselves apart from competitors. Offering comprehensive, integrated solutions not only enhances customer loyalty but also provides a distinctive edge, helping businesses attract and retain customers more effectively than those who do not offer such services.

Challenges and Considerations in Embedded Finance in India

While embedded finance holds immense potential in India, it also comes with its own set of challenges. One of the key concerns is regulatory compliance, as the financial sector in India is subject to stringent regulations. Companies looking to offer financial products must navigate and comply with the rules and guidelines established by the Reserve Bank of India (RBI) and other relevant financial authorities, ensuring that their offerings align with the legal framework.

Another significant challenge is data security. As digital finance continues to expand rapidly, consumers are increasingly worried about the safety of their personal and financial information. To address these concerns, companies must make substantial investments in robust security systems and technologies. This is essential not only for protecting sensitive data but also for building and maintaining consumer trust in the digital financial ecosystem.

Conclusion: Transforming Financial Access: The Rise of Embedded Finance in India

Embedded finance is transforming how Indian consumers interact with financial services by seamlessly integrating financial products into everyday digital platforms like e-commerce websites, ride-sharing apps, and mobile wallets. This integration removes traditional barriers, making financial tools more accessible and convenient for a wider population. It allows users to access various financial services without leaving the platforms they already use, which is especially impactful in a country like India, where digital adoption is rapidly increasing.

As India continues its digital transformation, embedded finance is helping promote financial inclusion by providing greater access to financial products for underserved populations, including those in rural areas. This shift is empowering consumers, giving them more control over their financial decisions. Furthermore, embedded finance is driving innovation in the financial services sector, creating new opportunities for growth, improved customer experiences, and more tailored solutions. This trend is reshaping India’s financial ecosystem, benefiting both consumers and businesses alike.

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