Afterpay and Klarna - another dimension to embedded finance

So lets say you have finished making a purchase at a grocery store and you suddenly realized you do not have enough money to cover your bills. That could be disheartening. For most people, the only option is to keep back some of the items they picked in order to reduce the bill and pay. Well, how about being able to access a loan service instantly that covers your bills and allows you to pay back later? Well, this is a good example of of embedded finance. We will look at two fintech platforms that offer this type of service. First of all, What is embedded finance is?

Understanding embedded finance

You probably know what it is - maybe the name sounds unfamiliar. There are many businesses that offer products and services that are not finance related. For example a taxi service, shoe shop, your hair stylist, etc. However, these non-finance businesses need a digital channel to make customers pay them. Now integrating a digital payment service to that non-finance business to allow customers check out, is what we call embedded finance.

One major aspect of embedded finance is fintech. These are platforms that deliver financial services using technology. Fintech platforms have delivered embedded finance across almost all sectors, making it possible for customers to shop comfortably in person and online.

Having understood embedded finance and how it relates to fintech, lets look at two platforms that are making life easier for shoppers when its time to check out.

Afterpay and Klarna - embedded lending platforms

Afterpay and Klarna are just two examples of platforms that have taken embedded finance to a whole new level. These platforms help you find great deals across many online shopping platforms. Once you have discovered what to buy and its time to pay, you could take a quick loan. Basically, you can buy now and pay later.

Each of the two platforms allow you to pay by installments while you go home with the products purchased as if you paid in full. You are free to spread your repayments across several weeks - up to 6 weeks. This makes it easy to make purchases online, or when you are low on cash. Lets take a closer look at each service:

• Afterpay: This platform is a one-stop destination for online and in-person shopping. They list deals from major ecommerce platforms and online stores from across the globe, making it easy for customers to find what they are looking for. Then as a payment gateway, they allow customers to make a down payment of choice and finish up payments later.

Main features of Afterpay

1. Listing Top brands and shops online: Users have access to global and local brands including the likes of Nike, Target, and many others.

2. Physical stores near you: Afterpay is live in many physical stores too. So if customers choose to shop in person, they can still take out the loans from the local stores around the area.

3. Discounts: The platform also rewards shoppers with some discounts so they keep coming back.

4. Pay in flexible installments: Once you are done shopping, you choose how and when to pay. Customers are allowed to pay in up to 4 different installments and there is no interest attached. For those that need more time, Afterpay still allows them to spread the repayment over 6 months or 12 months. Of course, it attracts interest based on the length or period of repayment.

You can learn more about Afterpay. Click here to do that. If you wish to download their mobile app, then its available in Google Playstore or Apple iOS store. Feel free to connect with Afterpay on X.

• Klarna: This is another giant in the embedded loans business. They make it easy for customers to pay how much they have and when they wish. Klarna offers instant loans to cover up customer shopping bills and then allows them to spread out the repayment over time depending on what they want. So a $80 bill could be paid in 4 installments of $20.

Main features of Klarna

1. Featured stores and brands: Customers have access to a large database of stores like Sony, Dyson and local brands.

2. Supported physical shops: Those that prefer to shop in person can use the Klarna card to check out at designated physical shops.

3. Rewards club: Each customer that spends at least $1 joins the reward club. The more purchases made in excess of $1, the more points picked. These points could be exchanged for discounts or premium shopping experience.

4. Loyalty cards: These are physical checkout cards for in-person shopping. But no need to carry the cards around. Just add them to your app and collect points as a reward. Points are exchanged for exclusive services as explained above.

5. Klarna pay: This is the core service which allows customers to pay the amount of choice and when. Customers could decide to pay in 4 installments within 2 weeks of the purchase. No interest attached. Users could also choose to pay in 30 days time. For bulky purchases, payments could be spread over 2 years with an interest rate that starts from 8% per annum.

Get the Klarna browser extension. Feel free to link up with Klarna on X

Conclusion

Embedded finance is an area that is constantly growing and adding more possibilities. Fintech platforms are making it easier for users to pay at their convenience. Afterpay and Klarna are making it easier for users to buy now and pay later.

Share with us any other similar fintech services that is making embedded finance a reality.