Embedded finance — where financial products and payments pop up in any number of consumers’ daily activities — is now an expectation, a “need to have” for banks and enterprises.
Deirdre McClure, chief customer officer at Treasury Prime, told PYMNTS that the demand for seamless financial interactions is especially strong among younger consumers, millennials and Gen Zers in particular. For the providers and platforms that prove adept at meeting that demand, the benefits can be significant, chiefly through ancillary revenue streams and deepened customer loyalty.
“When consumers today are developing brand loyalties around financial services and banking services, they have a lot more choices,” she said, noting that the days of walking into a branch, setting up a checking account and sticking with that bank for decades are over.
Similarly, large companies are faced with the challenges of getting, and keeping, consumers’ attention and wallet share, a challenge that is greatly improved when a simple embedded payments tool is added into the mix.
This, as studies show that most consumers are now interested in making payments across digital channels, while the use of digital wallets has been on the rise. In fact, PYMNTS’ data shows that 78% of Americans prefer to bank digitally, giving a sense of what they expect from banking today.
But creating financial ecosystems demands that account-level data, platforms, banks, FinTechs and merchants work together. It is against that backdrop, McClure said, that banking-as-a-service (BaaS) can build mutually beneficial relationships between those parties.
A so-called “greenfield opportunity” exists, she said, noting to PYMNTS that Treasury Prime often sees businesses show up with a strong idea of how embedded finance can help their top line — but little insight into how much it would cost (in time or money) to bring those functionalities in house.
“These companies don’t know what they don’t know about banking,” she quipped.
BaaS, she said, and the connectivity enabled by APIs, gives stakeholders the flexibility they need to offer embedded finance but, “They don’t need a whole new team to do this themselves.”
Given the current macro environment, she said, anything efficiency-related that can improve core operational metrics is going to get a second look and be taken quite seriously.
To that point, she said, embedded finance can have a long term impact towards keeping consumers in place that might otherwise have dropped out of an app or platform because the desired payments functionality was not there.
In addition, there’s the potential to attract a whole new set of customers, brought into the ecosystem by a continued digital transformation marked by personalized financial journeys.
Transforming Industries, Too
The value of embedded payments extends well beyond demographics, she said, and can transform entire industries.
“We’re seeing certain verticals where this makes sense given customers’ needs, and pain points,” she said, highlighting construction, real estate, insurance and health as a few obvious candidates in need of some payment friction-reduction therapy.
Looking ahead, McClure said, APIs and embedded finance are only starting to change the face of banking.
“We’re at the very beginning of all this. We’re at the top of the second inning and there’s a long way to go. Every single business has an opportunity to utilize this technology, and we’re just scratching the surface.”