When Angela Strange, General Partner at Andreessen Horowitz, asserted in 2019 that “any company could become a fintech company”, Uber was one of the main examples that she cited. Although the business was initially a disruptor in the traditional mobility market sector, Uber now offers credit cards, digital wallets, and an instant-payment service to its drivers.
“For Uber, embedding financial services has two benefits,” Strange said in a conference presentation that has become highly influential in fintech circles. They spend a lot of time acquiring drivers. They then have to pay a margin for rides. If they have a margin for banking services, it is easier to cover that cost. Furthermore, if I’m a driver, I’m more likely to stay with a company that is also providing my financial services.
This trend can be seen in almost every industry, including the supply chain. Nearly all industries were forced to rethink how they operate when the pandemic struck. Retailers, healthcare providers, and financial institutions are all now using digital technology to improve their internal processes. This has led to an increased interest in embedded finance and the potential benefits it could bring.
According to a report,Global retail is expected to account for $3.5 trillion of embedded finance. Mambu, a cloud-based banking platform, has forecasted that the retail sector would account for 49% within the next ten decades. Embedded finance is a topic of great interest in the FinTech sector. This should make it a priority for those looking to grow their customer base and expand their business.
What is embedded finance? It’s the incorporation a financial product/service into a nonfinancial product. In clearest parlance, embedded finance is when non-financial businesses and organizations include financial services — such as payments, credit, insurance, and savings — as part of their services.
Embedded finance is a new concept in Nigeria that some are championing despite its novelty. One of them is weKurnect OnePipe is now a partner in their product development Growtrade provide tools and services to merchants and suppliers that allow them to manage their business better, offer credit lines to buyers, and help them grow in their trade. 90% of trade activities, such as ordering, managing inventory, and making payments, are performed manually. This inefficiency creates friction across the supply chain and increases risks. WeKurnect is a digital platform that enables all orders, payments, inventory, and fulfillment to be transferred to the Growtrade platform. This will eliminate inefficiencies and friction. Growtrade makes it seamless for suppliers/wholesalers of FMCG products to pay for orders by crediting designated Growtrade accounts or by paying cash to the delivery driver who in turn deposits (through any touchpoint – bank, agent, POS or ATM) these funds into the designated accounts. The manufacturer can then transfer the funds to the distributor that they have already identified on the platform. Growtrade accounts can be opened by merchants in minutes. They can then make payments to suppliers through their Growtrade account. All orders are automatically reconciled to the distributor. Products are also delivered by logistics partners.
Growtrade solved a difficult technical problem by creating a simple, user-friendly tool to support merchants and suppliers of any size. Their open API connectors have enabled third-party services to connect to this community and eliminate friction in trade. The platform continues to expand to offer these businesses a range of products to help them trade more efficiently, grow profits, and receive faster order processing since payments are made in real-time.
Growtrade’s key feature is seamless credit access for merchants. Growtrade takes the advantage of OnePipe’s banking-as-a-service (BaaS) technology and embedded finance arrangements to provide credit in real-time to these merchants who already consume credit informally. They use credit to buy from their suppliers. The offline process involves bookkeeping which can be stressful and largely informal. Growtrade gives them an edge in this arena by:
- Offering loans with greater terms
- Loans for new retailers are offered based upon alternative data underwriting. This allows them to skip the lengthy process that involves building trust with different suppliers.
- Multi-purpose loans are available
The credit increases merchants’ purchasing power and allows them to do more business on the platform even with liquidity constraints. Merchants need frequent, small ticket size and short duration credit that banks traditionally aren’t able to underwrite, hence suppliers are leveraging their relationships with retailers to underwrite them using data on their payment history to finance their invoices. Growtrade helps merchants digitize their operations, enabling them to manage inventory and catalog products.