Fintech
The New Era of Value Creation for E-Commerce and FinTech
Francesco AltisentVice President of Product, Payments and Banking at MangoPayaddresses the topic of embedded finance, digital wallets, orchestration and interconnectivity.
The continued growth of e-commerce underscores its apparent resilience against economic headwinds and geopolitical instability. This growth presents countless opportunities for fintech and e-commerce companies as they create more integrated payment experiences for end users.
E-commerce platforms leverage partnerships with fintechs to offer integrated financial solutions to end users, such as BNPL (Buy Now, Pay Later), one-click payments, co-branded credit cards, embedded wallets, and more. Through these partnerships, fintechs can tap into a large user base, and e-commerce platforms offer a streamlined payment experience to their customers, while unlocking new revenue streams from additional monetization and revenue sharing opportunities. For end users, this means a more convenient and unified shopping experience. Fintechs can reduce their cost per acquisition (CPA), and e-commerce increases its revenue, while end users enjoy a safer and smoother experience. All of this paves the way for more sustainable growth.
The Rapid Rise of Embedded Finance
The market value of Embedded Finance is expected to grow to $7.2 trillion by 2030with insurance, finance and payments leading the way. B2B BNPL and trade finance solutions are driving this growth, giving merchants faster access to working capital and accelerating adoption by businesses and consumers.
Meanwhile, FinTech-enabled marketplaces and platforms are commanding higher valuations than their peers, demonstrating the power of Embedded Finance to enhance customer experience and drive business growth. Through 2024, we expect to see a continued convergence of financial services and non-financial experiences. This trend will translate into a significant share of FinTech revenues being generated via embedded channels, further cementing the transformative impact of this emerging technology.
The Power of the Wallet
Wallet infrastructure enables companies to create digital wallets for their customers, allowing them to store, send, and receive funds effortlessly. The same infrastructure also provides a solid foundation for marketplaces and platforms to capture additional revenue streams through wallet-facilitated transactions within their apps and websites. Payment flows that operate outside of a wallet infrastructure could limit customization and hamper revenue potential. Additionally, e-wallets’ ability to hold funds through their Electronic Money Institution (EMI) license provides platforms with greater flexibility to hold funds within their ecosystem when needed.
On the operational front, a wallet infrastructure streamlines the movement of money across the platform, allowing marketplaces to create multiple wallet accounts for each type of transaction, including fees, platform fees, seller wallets, and even buyer wallets.
This segmentation improves financial transparency, giving both sellers and buyers greater control over their funds. Additionally, the same wallet infrastructure can be the basis for creating an integrated seller earnings management experience directly within the platform. This allows sellers to track their earnings, manage payments, and access comprehensive financial information, streamlining their operations and promoting customer satisfaction.
Orchestration is the key to unification
While it provides a number of benefits, a wallet infrastructure alone is not sufficient to create a scalable payment flow. A payment orchestration layer brings together multiple payment systems into a single, interoperable ecosystem, providing greater control and flexibility in scaling payment operations. In a vendor-locked payment setup, payment data is often captured and secured in a non-interoperable token vault within a payment provider.
With the payment technology network in an Embedded Finance setup, building automation without an interoperable token vault can be challenging. Additionally, managing refunds and chargebacks from multiple payment providers and payment methods may require platforms to build their own unified PaymentOps ledger, or juggle multiple dashboards from different payment providers. Both approaches are time-consuming and resource-intensive.
A payments orchestration layer not only unifies all of your operations, but also provides a network of third-party providers, such as payment gateways, fraud prevention solutions, CMS, and more, enabling faster integrations.
The shift towards interconnectivity
With unified experiences becoming the new standard, we will see a shift in the e-commerce payment system towards a more interconnected and buyer-agnostic ecosystem.
By leveraging both a wallet-based payment infrastructure and payment orchestration, a modern marketplace can achieve agile and scalable operations by unifying its operations into a single ecosystem and unlocking efficiency and revenue growth. This allows the entire infrastructure to be future-proofed as digital commerce continues to evolve.
This op-ed piece was first published in The Paypers’ Fintech Marketplace and Platform Report 2024 that taps into the rapidly growing e-commerce industry, serving as the definitive source of information for businesses looking to expand and grow their consumer base.
About Francesc Altisent
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