Today’s financial landscape is changing as embedded finance integrates banking services into everyday consumer experiences. This development is driven by brands stepping into roles traditionally held by banks, creating innovative and convenient financial solutions for consumers.
A PYMNTS Intelligence Report, “Brands as the New Bankers: The Changing Face of Financial Services,” in collaboration with Galileo, explores the critical decision facing traditional banks: adapt to these changes and collaborate with emerging brands or risk losing their competitive advantage.
The adoption of embedded finance offers advantages for consumer brands eager to deepen connections with younger demographics. According to the report, 63% of U.S. consumers age 18 to 34 are open to receiving financial services from non-financial brands. This willingness aligns closely with trends observed in Europe, where 52% of consumers 25 to 34 find financial products offered by their favorite brands more convenient than those from traditional banks.
This connection between brand loyalty and the demand for financial products is an opportunity for businesses. According to a whitepaper co-authored by the Boston Consulting Group, retailers using banking-as-a-service (BaaS) have reported conversion rate increases of 5% to 12% and average order value jumps of 15% to 30%. Particularly in the fashion sector, these figures illustrate the tangible benefits of embedding financial services into the shopping experience.
While brands are capturing consumer interest, traditional banks still hold a vital asset: trust. More than 70% of consumers identify traditional banks as their most trusted financial service providers.
This trust can be a powerful tool as banks seek to capitalize on the embedded finance trend. The potential revenue for European banks from embedded finance is projected to grow from €20 billion to €100 billion by 2030, demonstrating the financial stakes involved.
Lenders recognize this potential, with 67% of those without embedded lending products considering offering personal loans directly through brands. This enthusiasm indicates a wider acceptance of embedded finance and its ability to elevate customer acquisition strategies.
For banks, forming strategic partnerships with technology platforms is essential for thriving in the embedded finance arena. Collaborations enable banks to enhance their offerings and deliver tailored financial solutions that resonate with consumers. Successful examples include Uber’s partnership with Evolve Bank & Trust to provide a debit Mastercard for drivers, enabling quicker payments and rewards on fuel purchases.
Such partnerships not only amplify banks’ reach but allows them to tap into niche markets. By aligning with brands that consumers already trust, banks can create personalized financial experiences that enhance customer engagement and loyalty.
Embedded finance is more than just a trend. It marks a new era in how consumers engage with financial services. Brands that capitalize on this opportunity by integrating financial solutions into their offerings stand to gain increased customer loyalty and new revenue streams.
Meanwhile, traditional banks must leverage their established trust and forge strategic partnerships to remain relevant. As embedded finance becomes a key part of the customer engagement process, those who act decisively will be well-positioned for the future.
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