Although embedded finance has rapidly hit the radars of businesses globally over the last twelve months many may be surprised to learn that just 9% of businesses currently have an embedded finance offering, according to a new report.

In a year’s time, that figure could be vastly different with OpenPayd’s newly-published ‘Embedded finance in 2023’ whitepaper suggesting that adoption rates could soon soar. It found that almost three in four businesses are planning to launch embedded finance solutions in response to consumer behaviour changes. There is also enough evidence to suggest that embedded finance is no longer a fleeting trend.

With that in mind, here are five reasons why businesses are increasingly looking to embrace this technology and why it could shape the future of financial services in the digital age.


1.  Seamless user experience

Embedded finance is reshaping the financial landscape, blurring the boundaries between traditional financial institutions and non-financial businesses. This dynamic concept, although not new, has gained significant traction due to shifts in lifestyle and work patterns, prompting businesses to cater to evolving consumer expectations.

At its core, embedded finance involves the fusion of non-financial service providers, such as retailers or utility companies, with financial services like payment processing, lending, or insurance. The integration of financial capabilities into everyday transactions, such as remote payments, is not only meeting consumer demand for convenience and a more seamless experience but is also opening new revenue avenues for forward-thinking organizations.

2. Tech evolution and the rise of APIs

As businesses recognise the benefits of offering financial services, technological advancements, particularly Application Programming Interfaces (APIs), are facilitating the integration of these services into various platforms. APIs enable real-time data exchange, empowering systems and applications to effortlessly embed financial functionalities like payments.

This not only enhances customer engagement but also fosters loyalty by providing a streamlined experience. Banks and credit unions are capitalising on this trend, extending their services through partnerships with third parties. By broadening their customer bases and exploring new revenue streams, financial institutions can continue to remain relevant in a landscape where big tech and fintech companies are introducing high-concept applications.

3. Meeting Gen Z expectations

As the workforce welcomes more members of Generation Z, businesses are adapting their financial technology strategies to align with the preferences and expectations of this demographic. With increased spending power, Gen Z is driving the adoption of innovative financial experiences. Today’s younger consumers are increasingly inclined to shop via social media, explore checkout-free supermarkets, and engage with the metaverse.

This demand presents a unique opportunity for businesses to embed a myriad of financial services into platforms where consumers spend their time and money, positioning embedded finance as an invisible but crucial technology for modern payment experiences.

4. Ensuring tailored experiences through Data and AI

While the trajectory of embedded finance appears promising, businesses must tread carefully to ensure its success. The abundance of offers in online transactions, such as purchasing plane tickets or renting cars, can potentially overwhelm consumers. To provide a genuine embedded finance experience, businesses must leverage data and employ artificial intelligence to tailor product and service offerings precisely to customer needs. Striking the right balance is crucial as inundating consumers with irrelevant offers can be counterproductive.

Advanced technology, including AI, has already become instrumental in ensuring a faster, smoother, and more intuitive user experience. As industry knowledge increases in this area it can open the door to new revenue streams and opportunities for banks, insurers, fintechs, and other financial service providers in 2024 and beyond.

5. Enhanced customer loyalty and higher conversion rates

Embedded finance isn’t just a trend; it’s vital for businesses seeking to thrive in a rapidly evolving landscape. The convergence of financial and non-financial services offers a one-stop-shopping experience, aligning with the demand for efficiency and seamlessness in consumer transactions. Whether through partnerships with mobility services or integrating ‘Buy Now Pay Later’ options, businesses can enhance customer loyalty and drive higher conversion rates.

Moreover, as financial services become a fundamental necessity for digital natives, organizations can leverage embedded finance to attract new customers, increase loyalty, and grow revenue and margin. In addition, the right technology, including microservices and Identity and Access Management (IAM) solutions can play a pivotal role in ensuring a more transparent and secure user journey.


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