APIs: The Future of Embedded Financing

by Kieran Daly
August 11, 2023
APIs: The Future of Embedded Financing

The world of technology is forever evolving, each day there is an innovation that makes the lives of business owners easier. One such innovation is that of APIs and they have already started to leave their mark in the world of embedded financing.

Read on to discover how APIs are changing the way that your business finances purchases as well as learn how Backd is taking the steps to secure your business's growth in the future through our technology.  

What is embedded finance? 

Embedded finance refers to the integration of financial services directly into non-financial platforms or applications, enabling customers to access financial products and services seamlessly as part of their regular activities within those platforms. It eliminates the need for users to leave the host platform and visit a separate financial institution to avail themselves of financial services.

In traditional finance, customers typically interact with banks or financial institutions through their dedicated websites, mobile app, or physical branches. However, embedded finance flips this model by bringing financial services directly to customers within the context of their everyday experiences. 

Over the past few years, with the advancement of technology, embedded finance has experienced significant growth. FinTechs and the availability of robust APIs have allowed for easier integration of financial services into non-financial platforms. This is in addition to the change in consumer behavior where modern consumers are increasingly preferring convenience and a streamlined experience. 

What is API? 

An API (Application Programming Interface) is a set of rules and protocols that allows different software applications to communicate and interact with each other. It serves as an intermediary that enables the exchange of data and functionalities between distinct software systems. 

In essence, an API defines the methods and data formats that developers can use to access specific features or data from a software application or service. APIs act as a bridge between different applications, allowing them to work together and share information seamlessly.

APIs are crucial components of modern software development and play a vital role in enabling integrations between various systems, applications, and services. They facilitate the development of third-party applications, as developers can use the API to interact with the functionalities of a platform or service without needing to understand its internal implementation details. 

API’s Role in Embedded Finance

APIs play a fundamental role and transformative role in embedded financing. They are the technological backbone that facilitates the integration of embedded financing and empowers businesses to offer financial services as part of their core offerings. APIs directly contribute to embedded financing through:

  1. Seamless Integration: APIs enable a smooth and secure connection between the non-financial platform and the financial service provider. Through APIs, financial data and functionalities can be accessed, shared, and utilized within the host platform, creating a seamless user experience for customers. 

  2. Real-Time Data Exchange: APIs allow for real-time data exchange between the platform and financial service providers. This real-time capability is critical in embedded financing, as it enables instant approval, transactions, and updates without requiring users to leave the host platform.

  3. Customization and Personalization: APIs provide the flexibility for businesses to customize and tailor financial services to meet the specific needs of their customers. This personalization enhances the overall user experience and strengthens customer loyalty. 

  4. Expanding Market Reach: With APIs, financial institutions can partner with non-financial companies to reach new customer segments and markets. By embedding financial services into diverse platforms, companies can tap into previously untapped customer bases. 

  5. Enhanced Security and Compliance: APIs are designed with robust security measures to ensure the safe exchange of sensitive financial data. Compliance with industry regulations is also integrated into the API framework, ensuring that embedded financing solutions always adhere to the necessary legal requirements.

  6. Accelerating Innovation: APIs foster innovation by allowing FInTech companies and developers to create innovative financial products and services, like BNPL, that can be easily integrated into various platforms. This opens up new opportunities for new business models and revenue streams.

  7. Improved Customer Experience: APIs enable a frictionless user experience, as customers can access financial services without leaving their preferred platforms. This convenience and simplicity lead to higher customer satisfaction and engagement.

  8. Access to a Broader Range of Services: Through embedded financing, customers can access a wider range of financial services beyond traditional banking, such as insurance, lending, investment, and more, all from within the host platform. 

Overall, APIs act as the enabler for embedded financing, allowing financial services to be seamlessly integrated into the everyday activities of users, offering convenience, accessibility, and expanded financial capabilities. The growing adoption of APIs in this context is transforming how financial services are delivered and experienced in today’s digital economy.

In the future, as technology continues to advance, it can be expected that we will see APIs play a heavier and more pivotal role in the further development of embedded financing and world business financing as a whole. Over time, like most technology, we could begin to see more APIs grow to become more sophisticated, enabling even deeper integration of financial services into non-financial platforms. 

With the rise of AI, we could begin to see this technology beginning to merge with APIs in order to increase automation in financial decision-making and service delivery. This could result in even quicker loan approvals, automated risk assessments, and more efficient customer support. However, as APIs evolve they will need to do so within the confines of regulations in the financial sector, assisting businesses in maintaining compliance with changing laws and standards. 

Backd: Embracing the Future Today To Fund Your Growth

Here at Backd, we embrace the newest technological advancements with APIs and embedded financing in order to ensure that your business's growth is always at the heart of everything we do. 

Our online application platform delivers a fast and straightforward process that requires minimal paperwork. The intuitive designs guide you through the application process and ensure that you are always provided with relevant information for successful application submissions.

Submitted information is then analyzed by our analytics platform, which applies hundreds of proprietary data points that Backd Business Funding has accumulated and developed over the years to provide you with a pre-qualified offer.

The system analyzes a broad array of factors including historical advance data for existing clients, company revenue, and the business owner's personal financial history.

At Backd, we’re proud to be a part of the next wave of innovation with our newest embedded financial solution, BackdPay

BackdPay is the new way to pay, allowing you to offer your clients flexible financing while still allowing your business to be paid upfront. Yes, you read that right, you get paid instantly at the time of purchase. 

With BackdPay, Backd will provide you with the full payment while your clients make their scheduled payments to us. We’ll handle all the necessary credit checks and better yet, we’ll even reward you for offering flexible financing to the small business community by paying you up to 1% in referral fees for each funded purchase. 

Don’t wait to offer flexible financing, sign up and start offering BackdPay today

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