A Whole New World of Embedded Finance

As more people use smartphones and other mobile devices to conduct their daily lives, mobile payments are becoming increasingly popular, for example, research suggests that over half of US and UK consumers had used a mobile wallet in the last 90 days. 

Simultaneously, consumers across geographies expressed a growing comfort with the idea of a cashless society. Nearly three quarters (71%) of U.S. consumers confirmed they were neutral or didn’t have any worries about moving to a cashless society, and almost one-third (31%) reported using cash less than they did 12 months ago.

In order to capitalise on the growth of cashless, digital options, a whole new world of embedded finance is starting to take hold, with applications including Buy Now Pay Later (BNPL),  co-branded credit cards and on- demand pay.  

While consumers continue to show strong loyalty to traditional banks, they are increasingly open to exploring modern, innovative options that better align with their unique financial needs. This shift is paving the way for a future of payments that is seamless, personalised and embedded within an existing experience or relationship. 

Consumers Eager to Embrace New Opportunities

As consumers increasingly engage with new, digital tools, they are becoming more accustomed to seamless, convenient transactions and an increasing amount of choice. US research suggests that even satisfied credit card holders are on the hunt for their next credit cards, and are being influenced by the level of flexibility and personalisation available.

Similarly, consumers are increasingly open to embracing new technologies and financial services that provide clear benefits. For example, during the recent cost of living crisis, UK households reported turning to short term credit options, such as BNPL to increase payment flexibility and help manage budgets. Research showed that 47% of UK BNPL users were drawn to this option due to its attractive zero interest rates, with 42% choosing to use BNPL  because of the flexibility it provides, and a further 45% stating that it helped them with budgeting. 

Banks Aren’t Going Anywhere… They Are Going Everywhere  

Despite the rise in digital adoption and alternate services and providers, customers feel loyalty toward their primary banks and tend to be very “sticky” when it comes to core banking services, such as current accounts, savings, debit cards, and mortgages. In fact, research found that more than half of consumers globally have used their primary bank for six years or longer. 

While consumers feel comfortable in their relationships with their primary bank, they are also not opposed to exploring more modern, innovative options, with research findings that one-third (34%) of consumers globally who currently use a traditional bank as their primary bank also use a digital only bank. Similarly, embedded finance offerings are primed to gain popularity, with 42% of US consumers confirming they would get financial services from a non-traditional provider, including a social media platform, retailer or tech brand, increasing to 63% among US consumers 18-34 years old. 

This tug-of-war between what consumers know and what they want highlights an appetite amongst the public for multiple relationships with financial providers, both traditional and new embedder brands. As a result, there is a massive opportunity for organisations to enter the market and for brands to embed tailored credit experiences into their offerings.

Thanks to innovations in embedded finance, brands can now build payments directly into their shopping experience, meaning cardholders won’t have to log into a bank’s website to manage their card. Traditionally, with legacy infrastructure, which relies on a patchwork of different solutions, it could take over a year to launch a new card program. However, now, brands can build credit cards through one single, modern tech stack, easily spinning up beautifully designed, embedded credit cards for new users and issuing them instantly. 

Brands can also harness the multitudes of data they have about each cardholder to determine spend controls catered to their individual needs and offer highly personalised and tailored rewards. This is a reimagining of how organisations can offer financial services, earn customer trust and loyalty. 

On-Demand Wages

Embedded finance technology is also being used by organisations to issue cards which provide workers with their pay or salary on demand. Accelerated Wage Access (AWA), where workers can get early access to earned wages as soon as their shift hours are approved, has become one of the biggest payroll trends, with more than 1 in 10 UK employers now offering this benefit.

AWA offers workers quicker access to their hard earned wages,  enabling them to reduce their reliance on credit, pay their bills on time, and better manage their finances. By offering AWA as a benefit, companies also help foster a more satisfied and engaged workforce, helping combat the financial squeeze on businesses caused by high employee turnover due to the escalating cost of hiring and training new workers.

A Bird’s Eye View 

From a bird’s-eye view , it’s clear that consumers are looking for a frictionless experience from start to finish—from being paid to storing, moving, and spending money.

Consumers globally are increasingly engaging with modern, digital payment options, and interacting with new providers and services that benefit them. This trend will continue accelerating as the world becomes increasingly digital. In the future, consumers’ personal lives and financial lives will merge and coexist in a faster, more user-friendly, more personalised, and more interconnected environment facilitated by the new world of embedded finance.