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Embedded Finance Expands Payment Options and Reduces Merchant Risk


October 11, 2022

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Conducting financial transactions online has been around for a while, but the practice rapidly accelerated during the pandemic. Digital finance is now ubiquitous in both B2C and B2B segments, with a priority placed on making digital payments across all channels. Recent data indicates that up to 82% of Americans now use digital payments, all made possible with embedded finance solutions.

But while the pandemic was the main force behind catalyzing the recent widespread adoption of digital finance, the practice is here to stay. According to recent studies, 68% of small to medium sized businesses want to digitally manage as many aspects of their businesses as possible, and 66% of consumers now believe FinTech solutions are necessary in personal finance.

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Digital finance is now an integral part of how we transact financial business because of the speed, efficiency and convenience when compared to that traditional banking solutions. “Streamlining and optimizing payments can have a really positive impact on a business’ bottom line,” noted Trish Cox, Head of Operations for Galileo. “Companies are increasingly looking to optimize payments so that they can lower costs, improve cash flow and gain actionable insights and data from spending — and many companies are turning to digital payment tools to accomplish these goals.”

The digital trend has expanded into the use of virtual cards. “Virtual cards act just like traditional plastic credit cards but exist only in digital format: There’s no physical card. Businesses can leverage virtual cards to make supplier payments more cost-effective than traditional methods like paper checks or ACH transfers,” explained Cox.

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The use of virtual cards offers more than just convenience. “Virtual cards are cheaper and faster to issue, require less manual processing and offer spending controls that enhance security and mitigate fraud, which can be costly,” Cox added.

In general, embedded finance not only reduces inconvenient friction points for businesses, but for consumers as well. “On the consumer side, that might mean enabling a shopper to access credit or insurance offerings during the course of the purchase process, without ever leaving the environment of the eCommerce merchant,” explained Cox.

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Furthermore, U.S. consumers are increasingly adopting the use of embedded payments, whether they realize it or not. According to a recent study, nearly one third of U.S. consumers have used embedded payments just through using ride share apps, and more than 40% of consumers have used digital wallets.

“There are four key areas in which embedded finance can provide value,” said Derek White, CEO of Galileo. “Payment speed, increased spending power via the extension of credit, insurance issuance and the creation of a B2B ‘brand’ where the intersection of use cases and experiences contributes to customer satisfaction and loyalty.”

“Embedded finance is potentially changing the way trillions of dollars flow between suppliers and buyers,” concluded White.

In the latest Embedded Finance Tracker®, a Galileo and PYMNTS collaboration, learn more on how embedded finance solutions are expanding the B2B and B2B digital payment experience as well as reducing the risk of fraud.