Healthcare Sector Leads Drive Toward the ‘Embedded Everything’ Economy

Embedded finance, and in particular lending, is finding its way into various URL, app and brick-and-mortar settings these days, and is also rendered at the point of sale, giving an indication of how prevalent its integration into the connected economy has become.

The opportunity — as measured in transaction volumes — will be a focus for consumers, lenders and small businesses in the near future. As Nandan Sheth, CEO of card-linked installment solution provider Splitit, told PYMNTS’ Karen Webster recently, he sees that future tied to three primary categories: lending, insurance and investments.

Call it the “embedded everything” economy, where transactions are part of the overall experience.

“From a consumer standpoint, there’s the expectation of a seamless experience that is connected to the core purchase you’re making,” Sheth told Webster as part of a conversation for our ongoing series, “What’s Next in Payments.”

Sheth highlighted his own interaction with the embedded options he encountered in the midst of an online journey. In booking a trip to Europe, he bought tickets online and was offered the opportunity (which he took) to buy trip insurance through a third party.

“I didn’t have to leave the airline’s site,” he said.

The Benefits and Challenges

For the firms and platforms that get it right, there’s the understanding that a one-size-fits-all approach will not be sufficient.

It’s critical to understand the various consumer segments and credit profiles. Customers with a FICO score of 650+ may not be “looking” for a loan; customers below that level may be entirely credit-worthy and may indeed want to finance their transactions. He noted that the financing should be offered relatively early on in the customer journey, not simply at the last few moments before the purchase.

“If you don’t understand this,” he said, of the platforms offering embedded lending, “you may not get the sales conversion that you’ve been looking for.”

A deeper understanding of customer nuances and their needs on a day-to-day basis, Sheth said, will help platforms avoid defaulting to the same embedded financing partners and models as their competition. In doing so, there’s a level of differentiation that can prove invaluable (such as “Pay on Delivery,” which Splitit developed with a merchant partner).

Sheth noted that embedded options can drive scale for a business by offering a personalized approach that leverages data gleaned from the customer’s banking relationship and the platform itself.

The economies of scale extend to the end user, too — they can get the proverbial “good deal” because the platform can offer that bespoke financing (and, presumably, lower rates or payments that might be found elsewhere). There’s the non-financial boon of knowing that the customer can get what they want and need at the moment a good or service is wanted or needed.

We’re all part of what Sheth called the “API economy,” where those application programming interfaces connect the banks, platforms and third parties, opening up the secure exchange of data, which in turn underpins embedded lending. Open banking, he said, may have yet to take off in the United States, but will gain momentum as artificial intelligence and machine learning help drive more innovation across platforms.

Partnerships can help speed that innovation, Sheth said, who pointed to Splitit’s recent launch of a solution that enables banks to offer installment plans at checkout.

Some Additional Considerations

Though embedded offers may seem like a no-brainer for merchants and platforms, Sheth cautioned that all stakeholders must be thoughtful about the regulatory environment, which is still evolving.

Even though lending products may be serviced by a third party, there may be obligations that vary from state to state — in terms of licenses, for example. It’s also incumbent upon the platform to ensure that authentication is intuitive and does not present so much friction that users abandon their transactions altogether.

Looking ahead, Sheth said that there’s particular promise in bringing embedded options more fully to the education, real estate and especially healthcare space, which has long existed as a fragmented industry, with payments winding their way between patients, insurers and providers.

“Embedded finance is here to stay, and it’s already pervasive in many use cases,” Sheth said. “It’s only going to become bigger, and more global, as the years go on.”