The embedded finance industry in Africa is growing 45.3% annually, making $10.3 billion, and is expected to reach $39.8 billion by 2029, according to a report by Finextra.
In contrast, the global embedded finance market is set to grow beyond $228 billion by 2028 according to Juniper Research.
Embedded finance integrates everyday needs into the digital experience, making payments, credit, and financial services within applications easily and without disruption.
There are numerous ways in which people are utilizing embedded finance services on their mobile devices including:
- Peer-to-peer transfers on social media networks such as WhatsApp and Facebook Messenger
- Embedded bank accounts, savings accounts
- Microinsurance on travel apps and e-commerce platforms
- Instant loans, credit building, integrated utilities, subscription management, expense tracking, spending insights, international money transfers, and cashback and rewards programs on e-commerce apps.
Moreover, the boom of cryptocurrency usage in Africa has builders attempting to help users leverage embedded finance to make crypto transactions within their mobile banking apps. Along with payments, crypto users would also be able to manage their crypto balance, trade, invest, and apply for crypto-credit on their phones through embedded finance.
“Embedded credit solutions can offer microloans and financial products to those with limited credit histories. Additionally, easy access to digital payments and investment opportunities through embedded platforms enables users to participate in the financial system more fully.
This approach not only broadens access to essential financial services but also fosters greater economic participation and empowerment for marginalised communities.” says Hannes Wessels, Country Head of Binance South Africa.
In Egypt, embedded finance is also being incorporated into the hospitality and pharmacy sectors, with fintechs such as OneOrder providing supply chain platforms to hospitality companies, and Grinta forming a marketplace for pharmaceuticals.
Mozare3, an agri-fintech company that gives Egyptian farmers access to financial services, has embedded finance integrated into their business model. The firm provides farmers with digital wallets, crop insurance, equipment leasing, and more that can support and advise the farmers in their business and building their credit scores.
But for the vision of embedded finance to be fully realized, some challenges will need to be addressed by innovators in this field, notably a lack of consumer trust, the cost implications particularly in fintech product integrations, and also government regulator requirements.
“Embedded finance is about improving the user experience by integrating financial services seamlessly into everyday activities. Assuming efficient, interoperable, and seamless instant payment systems are delivered, the challenge then becomes driving adoption of these rails,” explains Paula Hunter, executive director at the Mojaloop Foundation.
“This is where embedded finance is critical, as it can significantly increase adoption and, consequently, encourage financial inclusion in several ways.”
