OpenPayd, a global payments and banking-as-a-service (BaaS) platform, has revealed insights from the largest ever independent study of brand attitudes towards embedded finance. The data informs the report, Embedded finance surge to net €720billion for European brands by 2026, which suggests 73% of brands plan on launching embedded financial services within the next two years.
Across the countries surveyed, brands expect embedded finance to add an additional €720.78billion in revenue over the next five years. This is despite 95% admitting to not fully understanding what embedded finance means, and many encountering challenges associated with hiring fintech talent.
Preparedness does not match appetite:
- On average, across the four main sub-sectors of embedded finance – banking, payments, insurance and lending – respondents expected to increase their current revenues by ~7% over the next two years, ~11% over the next five years and ~15% over the next ten years.
- 91% only have a partial understanding of embedded finance, even though 73% say they plan to launch embedded finance offerings in the next two years, 18% in the next 12 months. 92% of brands plan to release offerings in the next five years. Only 5% already have an embedded finance offering.
- More than 7 in 10 (71%) plan to build new internal fintech teams to work alongside BaaS partners and implement embedded banking offers, for example. However, demand for fintech talent already significantly outstrips supply and this looks set to intensify.
- Partnerships will be extremely important, but most respondents, who were senior executives from brands generating a minimum of €60million in annual revenue, are unable to name appropriate embedded finance/BaaS partners.
Embedded finance offerings fuelled by desire to improve customer experience:
- The top three most appealing aspects of embedded finance were named by respondents as – retaining front-end customer experience (85%), increasing the number of customer touchpoints with their brand (84%) and offering mobile wallet or current account options to customers (79%).
- Financial benefits ranked lower – increased cross-selling opportunities were appealing to 68% of brands.
Enthusiasm differs across types of embedded finance
- Embedded banking: 6% already offer embedded banking to customers and nearly all (92%) plan to offer it in the next five years.
- Embedded payments: 4% of respondents said they already offer embedded payments to customers and 83% plan to offer in the next five years.
- Embedded insurance: No respondents reported that they already offer embedded insurance to customers and only 28% plan on doing so in the next five years.
- Embedded lending: No respondents reported that they already offer embedded lending to customers and less than a quarter (23%) plan to offer it in the next five years.
“It’s promising to see more and more customer-centricity from brands, who are anticipating mass shifts in consumer need and making ambitious plans to launch embedded financial services,” said Iana Dimitrova, Chief Executive at OpenPayd. “We’re on the cusp of an embedded finance revolution across B2C and B2B sectors, which will peak in the next two years. However, navigating the complex maze of infrastructure providers with limited in-house experience slows down value creation of the otherwise significant €720billion opportunity in Europe alone. No matter what, retailers, service-driven companies and all those in between are planning, partners will be essential – helping to navigate the complexities and to innovate ahead of demand.”
Conducted by Coleman Parkes, respondents included 150 senior executives from B2C and B2B marketplaces, horizontal and vertical SaaS brands and gig economy platforms across the UK, France, Germany, Italy and Spain. Brands covered markets from eCommerce and manufacturing to technology services and mobility and generate a minimum of €60million in annual revenue. The survey was completed in July 2021 in accordance with the Market Research Society’s Code of Conduct. Respondents were responsible for the identification and implementation of new product and service offers to customers.
