Study Finds Embedded Finance Innovations Keep Momentum Despite Adoption Hurdles

The telecom and media sector is witnessing a surge in demand for embedded finance solutions, with a strong inclination toward embracing innovations such as installment plans, digital wallets, loyalty programs and corporate credit cards.

This trend extends beyond marketplaces; recent PYMNTS Intelligence data has found that payment facilitators (PayFacs) and independent software vendors (ISVs) are also joining the fray, all fueled by a collective drive to enhance their services and maintain a competitive edge in this dynamic landscape.

Nevertheless, the current availability of installment plans and business credit cards remains limited, indicating a significant opportunity for growth in these areas.

Specifically, only 25% of PayFacs presently provide installment plans. However, 33% expressed significant interest in introducing innovations in this space. Similarly, some ISVs (9.7%) and marketplaces (23%) have also shown keen interest in integrating installment plan features for the first time.

Business credit cards represent another embedded finance offering with modest current adoption rates but high levels of demand. Notably, nearly half of marketplaces (46%) that do not currently offer corporate credit cards are very or extremely interested in embracing innovations in this space, while approximately one-third of PayFacs and one-quarter of ISVs share a similar sentiment.

For instance, PayFacs such as Square have already made significant strides in this area. The company introduced its Square Credit Card last June, aiming to provide sellers with enhanced spending flexibility and a rewards program tailored to reinvesting in their businesses.

With no late fees or annual fees, the credit card features a dynamic credit limit tied to the sales processed through Square, mirroring the growth trajectory of the seller’s business. Furthermore, it incentivizes spending by rewarding sellers with free card processing with each transaction.

Moreover, Square has expanded the functionality of its Square Loans product to better cater to larger sellers. These businesses now have access to loans that offer a fixed monthly repayment schedule, providing a more predictable and manageable structure compared to daily repayments.

Additionally, Square offers the option to leverage external data to optimize loan offer sizes, enhancing the overall borrowing experience for sellers.

“We’re expanding what Square Banking can provide to sellers, regardless of their size, to ensure they have the tools needed to grow their businesses, smooth out cash flow, and reduce the complexity of managing their inflows and outflows,” Christina Riechers, general manager of Square Banking, said at the time.

Tackling Embedded Finance Adoption Challenges

Despite the interest in installment plans and business credit cards, the adoption of embedded finance innovations is not without its challenges.

The study indicated that regulation and compliance pose the biggest hurdles to innovation. Specifically, 35% of ISVs and 31% of marketplaces in this sector identified it as their main challenge. In contrast, only 8.3% of PayFacs considered regulation and compliance as their primary challenge, highlighting their expertise in navigating complex regulatory landscapes.

However, lack of resources is the top concern for PayFacs in the media and telecom industry, with 33% facing this challenge — nearly double the cross-industry average of 17%.

Other significant issues include complex internal decision-making processes, ranking second among marketplaces, and the scarcity of reliable data to inform decisions, cited by 8.3% of PayFacs and 23% of marketplaces.

Moving forward, PayFacs, ISVs and marketplaces are poised to capitalize on significant growth opportunities within the media and telecom sector.

And while integrating new embedded finance innovations may pose certain challenges, “embedded finance solution providers can help players in the media and telecom space address these difficulties and smoothly onboard new innovations that satisfy their customers and keep them ahead of the competition,” the study noted.