NewKerala.com

How Embedded Finance Can Drive India's Next Wave of Financial Inclusion & Innovation

Embedded finance integrates services like payments and credit directly into non-financial platforms, making them accessible at the point of need. This model leverages India's smartphone and e-commerce growth to serve underserved populations and reduce costs. Embedded credit, in particular, can provide timely financing to SMEs through their existing tools. However, achieving its full potential will depend on a balanced, forward-looking regulatory framework that ensures both innovation and consumer protection.

Key Points: Embedded Finance: India's Path to Financial Inclusion & Innovation

  • Democratizes financial access
  • Lowers transaction costs
  • Enables seamless credit for SMEs
  • Requires adaptive regulation
3 min read

Embedded finance can drive next phase of financial innovation, inclusion in India: ORF Report

ORF report says embedded finance can democratize access, cut costs, and offer personalized financial services at scale in India's digital ecosystem.

"embedded finance has the potential to democratise access to formal financial services, reduce transaction costs, and deliver personalised solutions at scale - ORF Report"

New Delhi, January 1

Embedded finance has the potential to emerge as a cornerstone of India's next phase of financial sector innovation and inclusion, helping democratise access to formal financial services, reduce transaction costs, and deliver personalised solutions at scale, according to a report by global think tank Observer Research Foundation.

The report highlighted that embedded finance stands at the vanguard of India's evolving digital financial ecosystem and is transforming how individuals and businesses engage with financial systems.

It stated "embedded finance has the potential to democratise access to formal financial services, reduce transaction costs, and deliver personalised solutions at scale".

By leveraging the widespread penetration of smartphones, the rapid growth of e-commerce, and the expansion of platform-based services, embedded finance enables financial products to be offered seamlessly within non-financial digital platforms that people already use in their daily lives.

Embedded finance refers to the integration of financial services, such as payments, credit, insurance, or lending, directly into non-financial platforms or applications.

Instead of customers approaching traditional banks or financial institutions separately, financial services are built into digital platforms like e-commerce apps, business software, or service platforms, allowing users to access them at the point of need in a smooth and frictionless manner.

According to the ORF report, this model is particularly relevant for India, where large sections of the population remain underserved or underbanked despite significant progress in digital inclusion.

By embedding financial services into commonly used platforms, embedded finance can lower entry barriers, simplify access to formal finance, and reduce transaction costs for individuals and businesses.

The report noted that embedded credit stands out as one of the most powerful emerging embedded financial products. By integrating credit into the tools that small and medium enterprises (SMEs) already use, lenders can offer financing exactly when it is required.

Ultimately, the report stated that embedded finance creates a new path for low-friction, data-driven credit, which can support business growth and financial inclusion at scale.

However, the report cautioned that realising this potential will require a careful balance between innovation and oversight, flexibility and accountability, and growth and protection.

The ORF emphasised that only a forward-looking, harmonised, and adaptive regulatory framework can ensure that embedded finance contributes meaningfully to India's broader goals of economic resilience, digital sovereignty, and inclusive development.

With the right policy and regulatory approach, as per report, embedded finance can play a crucial role in shaping a more inclusive, efficient, and resilient financial ecosystem in the country.

- ANI

Share this article:

Reader Comments

P
Priya S
Absolutely agree with the report. For someone like my mother in a tier-2 city, going to a bank is a task. But if she can get a small loan or insurance directly within her kirana store's billing app, that's real inclusion. The key is simplicity.
R
Rohit P
Good concept, but data privacy is a major concern. When financial services are embedded everywhere, who controls our data? The report rightly calls for a strong regulatory framework. We can't have another situation like some digital lending apps.
S
Sarah B
Working in fintech, I see this daily. The potential for SMEs is enormous. Imagine a farmer getting crop insurance embedded in a weather app, or a truck driver getting fuel credit on a logistics platform. Execution and trust are everything.
V
Vikram M
Jio, Amazon, Flipkart... they are all moving in this direction. The next battleground is not users, but their financial footprint on these platforms. Hope competition benefits the common man with better rates and services.
K
Kavya N
As a respectful criticism, while the report is optimistic, we must ensure this doesn't lead to excessive debt for low-income households. Easy credit embedded in shopping apps can be tempting. Financial literacy must be part of this "inclusion".

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50