Embedded finance: assessing the benefits, use case, challenges and interest over time

Ozili, Peterson K (2022): Embedded finance: assessing the benefits, use case, challenges and interest over time. Published in:

Abstract

There is little academic interest in embedded finance despite the fact that embedded finance is part of the on-going digital finance revolution. This paper presents an overview of embedded finance. It identifies the applications, use case examples, benefits and challenges of embedded finance. The paper also analyzes global interest in embedded finance and compares it with interest in related finance concepts such as open finance, open banking, decentralized finance, financial innovation, FinTech and digital finance. Granger causality test and two-stage least square regression were used to assess interest over time in embedded finance. The empirical result show that interest in embedded finance increased significantly during the COVID-19 pandemic. The United States, the United Kingdom and India witnessed the highest interest in embedded finance compared to other countries. There is bi-directional Granger causality between interest in information about embedded finance and interest in information about financial innovation. There is uni-directional Granger causality between interest in information about embedded finance and interest in information about digital finance and open finance. The findings also reveal that interest in decentralized finance and open finance are significant determinants of interest in embedded finance. On the other hand, interest in embedded finance is a significant determinant of interest in digital finance, decentralized finance, FinTech and open banking. Also, interest in embedded finance is significantly correlated with interest in digital finance, decentralized finance, open banking and FinTech.

• Item Type: MPRA Paper
• Language: English
• Keywords: Embedded finance, open finance, open banking, decentralized finance, financial innovation, FinTech, digital finance, BaaS, API.
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

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