According to research, approximately $7tn worth of transactions will be processed by non-financial services businesses through embedded finance in the US by 2026.
This doubling in the value of transactions made using financial services embedded in the platform was revealed in a Bain & Company and Bain Capital Research report, reflecting research in Europe from banking-as-a-service (BaaS) supplier Vodeno. Is.
In a survey of more than 750 European retailers and e-commerce companies, Vodeno found that 64% were planning to adopt technology to enable them to embed financial products in their services.
Non-banking businesses such as retailers, e-commerce companies and distributors are increasingly offering financial products to their customers. It can also be a credit, loan or debit card.
According to Bain’s report, payments and lending will remain the largest embedded financial services, but it added that “imminent value-added services including insurance, tax and accounting” will also grow.
The report noted that traditional financial service providers faced major challenges from embedded finance.
“The rapid acceleration in the use of embedded finance, and its transition into the financial mainstream, is being pursued as its proposition enhances customer experience and financial access, as well as by reducing costs and risks for companies across the value chain. enhances the benefits,” said. report good.
It also said there would be a $51bn market by 2026 for software suppliers that enable embedded finance, often referred to as banking-as-a-service suppliers.
Adam Davis, associate partner in fintech practice at Bain & Co., said: “Embedded finance has quietly become an increasingly important part of the way consumers and businesses access payments and funding.”
He said embedded finance removes friction from the sector and makes financial services more relevant, accessible and helpful.
Jeff Tijsen, global fintech head at Bain & Co., said: “For businesses, this change is a huge opportunity. There will be no shortage of growth finance for the sector as the platform integrates everything from tax to payroll services in the years to come. experiment with doing.”
According to interviews with 50 senior business executives conducted by financial IT software supplier Finstra earlier this year and a survey of more than 1,600, 85% of organizations are already implementing BAS capabilities or planning to do so in the next 18 months. making plans.
Finstra said people are changing where they source financial services and are shifting to non-bank channels. “This trend will only accelerate if integrating regulated products into the customer journey becomes as easy as creating a social media account,” it said.