How Embedded Finance Benefits eCommerce Marketplaces

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Marketplaces have redefined eCommerce by bringing together a wide array of vendors on a single platform to give immense convenience to the customer. So great is their reach, spending on marketplaces is predicted to reach $2 trillion by 2025.

Embedded finance has already played a key role in the rise of marketplaces, and this trend is still gathering pace. 

finance benefits e-commerce marketplaces

“We’re at the stage now where virtually all online marketplaces have integrated digital payments, compared to fifteen years ago when online payments were really complicated,”  explains Jean-Jacques Le Bon, Vodeno’s Chief Strategy and Product Officer. “By embedding financial products and services directly into their offering, online marketplaces can go beyond payments to create a better customer experience, strengthening relationships, and fostering greater loyalty.” 

In this blog post, we will explore how embedded finance (EF) is going to supercharge the growth of marketplaces. 

The benefits of embedded finance for eCommerce marketplaces

EF presents various benefits to online marketplaces:

  1. Streamlining operations and improving payments
benefits embedded finance

Embedded payments is the first solution most marketplaces integrate as its fundamental to the customer journey. This reduces the need for third-party payment gateways, resulting in a more seamless and efficient payment experience for both buyers and sellers. Instant payment for consumers leads to higher conversion, and for merchants, it offers quicker access to revenues tied to turnover that contributes to improved cash flow management. 

“On payments, what businesses want is pretty simple,” says Le Bon. “Everyone wants lower prices, which requires frictionless and easy payments. There is still some space to get the costs down – the more the costs of transactions go down, the more cash businesses get back to reward the customer with incentives like cashback.”

  1. Instant access to credit for consumers and vendors

By leveraging EF, eCommerce marketplaces can offer personalised financing options for buyers, such as flexible payments, instalment plans or customised credit offerings. This flexibility in payment methods can significantly enhance the purchasing power of customers, leading to increased sales and customer satisfaction. 

benefits of embedded finance

Access to Banking-as-a-Service (BaaS) powered credit products also has applications for merchants. Small and medium-sized enterprises (SMEs) often face challenges in accessing credit, and marketplaces can address this pain point through merchant financing. This lending solution provides upfront capital to SME merchants with flexible repayment plans based on turnover. By providing access to capital and credit facilities, marketplaces can attract and retain the best vendors, a solution that benefits both parties and fosters greater vendor loyalty. 

  1. Customer experience and loyalty
embedded finance benefits

The greatest potential advantage of EF for marketplaces lies in improving customer experience and fostering loyalty. The benefit of EF-enabled loyalty programmes has been proven time and again in the retail space, but so far marketplaces are lagging behind.

Le Bon explains: “While the leading marketplaces are working to develop their own embedded finance solutions, these products are new tech that comes with its own challenges – such as regulation. If marketplaces want to extract the maximum value from EF, they will need to work with tech partners to unlock products and programmes that add real value to the customer experience and keep consumers coming back.”

Embedded finance is the key to marketplace success 

embedded finance benefits

Online marketplaces represent the future of retail, and ​the integration of embedded banking is fuelling growth in this space. From operational efficiency to enhanced customer experience and improved vendor loyalty, embedded finance has the potential to create new commercial opportunities and underpin competitive advantage within eCommerce.

In summary, the benefits of embedded finance for eCommerce marketplaces include:

  • Streamlined operations and payment processes
  • Enhanced customer experience and personalised financing options
  • Improved vendor loyalty through access to capital and innovative financial services

If you are interested in hearing more about the role of embedded finance within the eCommerce  marketplace sector, arrange a call with Vodeno today.

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