Embedded finance is a strategic approach adopted by businesses, particularly retailers, to offer their customers financial services integrated directly into their core products and user experiences. This practice brings numerous advantages that can lead to revenue growth, improved customer relationships and optimized business operations.  

Typically, embedded finance for a retailer consists of a digital wallet for customers, offering functionalities that enable the brand to become more integrated into customers’ daily lives, thereby elevating its visibility.  

The approach helps retailers optimize costs by streamlining existing customer journeys, as well as gain valuable customer insights to improve cross-selling and engagement to generate additional revenue. 

Digital wallet capabilities

Embedded finance is based on a scalable technical and commercial model. It can support:

  • Account-to-account transfers: Facilitate direct bank-to-bank payments, eliminating the need to use debit/credit cards and potentially reducing transaction costs for both in-store and online purchases.
  • Multi-currency payments: Enable customers with their own accounts to effortlessly transact in either euro or sterling currencies, with instantaneous currency exchange occurring at interbank rates, which are typically more favorable compared to retail foreign exchange rates.
  • Peer-to-peer payments: Enable customers to make instant transfers to other individuals, by scanning QR codes or sharing payment links through messaging channels. Faster payment rails support these transfers, making them suitable for repeated micro-payments like music downloads.
  • Virtual and physical debit cards: Provide customers with automatic issuance of cards tied to their accounts. These cards can be used via Near Field Communication (NFC) or online at all merchants, supporting transactions in applicable currencies.
  • Buy now, pay later (BNPL) schemes and loans: Integrate retailer-branded lending products, such as product finance or BNPL options. Open APIs facilitate smoother integration for existing finance providers, surpassing the limitations of legacy core banking technology.
  • Integrated travel booking: Incorporate travel booking functionalities within the app, including train, bus, taxi and other transportation options. This enables users to conveniently make travel arrangements alongside their financial activities.

Embedded finance is disrupting the retail market and can challenge traditional financial institutions, as the financial industry itself undergoes a profound transformation in the face of significant events such as an increasingly challenging economic climate. This shift is fueled by emerging digital technologies, evolving customer preferences and the emergence of new competitive players in the form of FinTechs. Retailers that embrace and develop embedded finance to broaden their range of services to meet evolving customer expectations, enhance their experience and grow their loyalty and retention will put themselves in a strong competitive position in this new era.

How DXC can help  

Retailers and other non-banking businesses are eager to incorporate value-added financial products, such as digital wallets, payments, BNPL schemes, insurance and more into their core customer journeys. However, many banks do not offer cost-effective, flexible and easily integratable solutions to meet the unique requirements of these businesses. As a result, retailers must navigate the complexities of implementing these solutions independently or seek assistance from system integrators.

DXC, together with our embedded payments platform partner, Modulr, and other ecosystem partners, can help retailers deploy tailored embedded finance solutions. DXC covers the entire value chain, from strategy and design to implementation and operation. As a trusted partner in retail transformations, DXC has worked with numerous retailers globally, leveraging our expertise to understand the intricacies of their ecosystems. Modulr, a provider of embedded payments with regulatory status as an Electronic Money Institution (EMI) in the UK and Europe, allows seamless integration of various payment-related features into businesses' processes and workflows, with services that include account creation, payment processing, open banking, payment reconciliation and card issuing.   

Some big names in retail are exploring the potential of embedded finance for their businesses, to gain a foothold in a market that is expected to reach just under $230 billion in terms of new revenue volume by 2025 in the US. Clearly, all retailers have a lot to gain by getting in on the action.

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About the authors

Guy Griffin is an embedded finance subject matter executive at DXC Technology, supporting retail and commercial customers in developing and deploying financial services propositions. He helps businesses develop valuable customer journeys, build supporting commercial models and plan effective go-to-market strategies. Guy has more than fifteen years of experience working with banks and retailers in a variety of sectors.

Dhritiman Mukherjee is a banking and capital markets executive at DXC Technology, with specialized knowledge in embedded finance. He has more than two decades of experience in the banking and financial services sector, working for global banks as well as being a Big 4 consultant. Dhritiman has deep expertise in business and operational strategy development, target operating model development, efficiency improvement, digital transformation, finance and regulatory change, risk and compliance, and program/project management.