If you’ve used Apple Pay or Google Pay for ride-hailing or e-commerce transactions, it’s highly likely that you’ve already experienced embedded finance without being aware of it.
Embedded finance — which involves integrating financial tools like payments and card issuing directly into existing non-financial services or platforms — is a concept that has gained significant traction in the Western world. However, it remains relatively unfamiliar in the Asian market, which still relies on traditional financial services that are not fully integrated into their platforms. Nonetheless, numerous businesses are starting to recognize its potential in unlocking new revenue streams.
One company at the forefront of leveraging this emerging trend is Airwallex. Originally focused on establishing a global financial infrastructure to address SME challenges, Airwallex has expanded its services and is catering to businesses in the embedded finance space.
KrASIA spoke to Agnes Shum, Enterprise Sales Director at Airwallex, to explore how businesses can harness the power of embedded finance to deliver greater value to customers, and some of the regulatory hurdles involved in adopting these solutions.
The following interview has been edited and consolidated for brevity and clarity.
KrASIA (Kr): In what ways has Airwallex capitalized on this emerging trend of embedded finance?
Agnes Shum (AS): Five of Airwallex’s product offerings — including global virtual account collection, payment gateway, FX, remittance, and card issuing — can be white-labeled and integrated into an enterprise customer’s infrastructure. In this way, we provide ready-made solutions for our customers to offer financial services such as payments and card issuing without having to build these capabilities from scratch.
Good examples are Shopify and Shopline, which primarily focus on building e-commerce websites for SME and enterprise customers. These sites leverage embedded finance by white-labeling payment service providers like Airwallex. This way, they can provide their own payment services — like Shop Pay or Shopline Payments — within their platform, making it more convenient for their users. As a result, a store owner on Shopify doesn’t need to find a separate payment gateway; they can directly use Shop Pay to accept payments from consumers.
Kr: What are other examples where companies used embedded finance to enhance their offerings in the financial system?
AS: In Hong Kong, we have collaborated with a prominent brokerage firm to issue white-label cards, where these cards are branded by the firm but utilize our payment infrastructure. With the recent downturn in stock markets leading to significant fund withdrawals, the firm decided to introduce these cards to increase loyalty and entice customers to leave funds in their brokerage accounts.
By utilizing the white-label prepaid card, customers now have the convenience of utilizing the remaining funds within the platform itself by making purchases with this card, without needing to withdraw them to their bank accounts.
Moreover, we have partnered with revenue financing platforms, empowering them to establish their own wallet system using Airwallex’s white-label offering. This enables the platforms to distribute funds directly to SME customers through the wallet, eliminating the need for traditional bank account deposits.
SMEs can conveniently access and utilize the wallet for foreign exchange (FX) and remittance services, providing them with greater financial flexibility. This arrangement also presents an opportunity for revenue financing platforms to generate additional income by charging FX and Payment Remittance fees associated with the wallet services.
By integrating this approach, financial operations are streamlined, and these platforms can generate new revenue streams via the embedded finance ecosystem.
Kr: What are the key factors or strategies for successfully implementing embedded finance?
AS: The primary objectives of embedded finance are facilitating a fast go-to-market strategy and enhancing the shopping experience for customers. Ensuring platform customers can swiftly launch their services and provide a seamless user experience is crucial. While platforms like Shopify and Shopline are not experts in the payments sector, they seek to generate additional revenue from payment streams.
Embedded finance contributes to increased operational efficiency by enabling businesses to save time and resources, while also expediting their go-to-market strategies. Additionally, it offers the advantage of creating customized solutions. This flexibility ensures that the product offering is not one-size-fits-all but adaptable to the requirements of individual platform customers.
Kr: How do you envision the collaboration between embedded finance and the traditional finance sector unfolding?
AS: I believe both sectors are able to integrate seamlessly. Companies like Shopify are not primarily aiming to become financial service providers. Their core business remains focused on their respective industries, with embedded finance serving as an additional revenue stream. While some may eventually evolve into full-fledged financial service providers, the majority (around 90%) do not have plans to take on that role.
Instead, embedded finance is seen as a complementary offering that enhances their existing services, making it a non-competing area.
Kr: What are the challenges or potential risks associated with embedded finance, and how can they be mitigated?
AS: Embedded finance is a relatively new sector, particularly in Asia, where diverse regulatory landscapes pose unique challenges. Singapore and Hong Kong, the main regions of operation for Airwallex, have introduced their own regulations with different requirements.
To ensure compliance, we maintain a dedicated team that thoroughly assesses and navigates the regulations of each jurisdiction. As we expand into Southeast Asian markets, we actively seek the necessary licenses to operate in those regions.
Businesses are increasingly interested in adopting embedded finance solutions across multiple jurisdictions. With our headquarters in Asia and an experienced team familiar with the region, Airwallex holds a competitive advantage over other partners primarily focused on Western markets. We aim to foster partnerships with Asian companies, growing together across the region.
Kr: Looking ahead, how do you foresee the future of embedded finance evolving, and what role will Airwallex play in shaping this future?
AS: In today’s digital landscape, simplicity and seamless experiences are key to capturing consumer interest. The demand for simplified and frictionless payments is on the rise, exemplified by the emergence of services like Apple Pay and various digital wallets. As more companies integrate financial services with their existing offerings, consumers will enjoy the convenience of conducting all transactions within their preferred platforms, eliminating the need for multiple partners or services.
The current macroeconomic conditions further emphasize the significance of embedded finance as various sectors merge, offering opportunities for creating new monetization streams. The continuous convergence of industries and the quest for a unified customer experience will undoubtedly drive the future expansion of embedded finance, benefiting both businesses and consumers alike.