Temenos flags growing popularity of embedded finance services space
Three in five Brits have used embedded finance services as part of the checkout process when shopping online in the past 12 months, according to research by Temenos.
The availability of these services – financial offerings provided online by non-financial companies - has grown substantially over the past few years.
They include: the use of an e-wallet such as PayPal or Google Pay (used by 42% of UK adults in the past 12 months); paying in instalments through a buy now pay later (BNPL) solution (17%).
Rounding up the payment at checkout to donate to a charity or transfer to a personal investment (15%); purchasing insurance when buying a high value product (13%); and taking out a loan at checkout to cover the cost of expensive items (6%).
Embedded finance services are particularly popular amongst younger generations, with four in five within the 18-34 age bracket having used one in the past year.
Kanika Hope, Chief Strategy Officer, Temenos, comments: "From retailers to airlines, ride sharing apps and coffee chains, brands are embedding financial services into their online and mobile offerings to increase revenues, increase customer loyalty and gain deeper insights on their customers.”
“The findings in this survey show that the use of these services is starting to gain real momentum, particularly among Gen Z looking for seamless and integrated online experiences in their daily lives.”
“This presents new opportunities for incumbent banks as well as new entrants like the banking-as-a-service providers."
E-wallets and BNPL
Of those who have checked out using an e-wallet, 72% do so at least once a month, with speed (66%) and security (40%) viewed by users as the most appealing factors.
Point of Sale instalment loans, specifically BNPL, are experiencing explosive growth in popularity and value.
In 2021, online revenue through BNPL increased by 45% compared to 2019. McKinsey estimates FinTechs have diverted up to $10 billion in annual revenues away from banks over the past ~24 months with BNPL offerings.
According to the Temenos survey, which involved 2,000 people, 54% of UK BNPL users claim that the fast to use nature of BNPL attracts them to the service, the most commonly cited benefit, followed by its user-friendliness (31%), and that they recognise and trust the brand they are interacting with (30%).
However, with inflation and the rising cost of living, affordability and responsible lending are growing concerns, and legislation is imminent in the UK.
