Embedded finance is transforming the way consumers and businesses interact with financial services, creating a seamless integration of payment processing, lending, insurance, and investment solutions directly into various platforms. This shift is gradually altering customer expectations of digital banks, challenging traditional banking models and prompting banks to innovate. As embedded finance becomes more prevalent, industry experts weigh in on its implications for customer expectations and the banking landscape.
Destabilising Customer Loyalty
Johannes Kolbeinsson, co-founder and CEO of PAYSTRAX, highlights a critical aspect of this evolution: embedded finance has the potential to destabilize customer loyalty to both traditional and digital banks. As payment transactions increasingly move from bank-owned applications to those of incorporated companies, customers are forming stronger relationships with brands that provide a superior user experience. This shift is forcing digital banks to rethink their loyalty programs and how they present themselves to clients. Kolbeinsson points to companies like Revolut, which are redefining digital experiences, and could serve as models for emerging banking trends. The implications are profound as consumers begin to favor brands offering integrated services over their traditional banking relationships.
Balancing Expectations and Reality
The changing expectations of customers are not without complications, as noted by Chirag Patel, product manager at Finova. While embedded finance solutions offer convenience, they also create a tension between customer desires and the realities of financial regulations. Customers now expect features such as one-click onboarding and hyper-personalized offers, but such ease requires consideration of compliance with underwriting practices and affordability assessments. Patel emphasizes that innovators in the lending space must strike a balance between speed and responsible lending. The successful fintech providers will be those who creatively embed smarter, more sustainable journeys that meet heightened customer expectations while adhering to regulatory responsibilities. This challenge reveals a significant opportunity for lenders willing to adapt.
Raising the Bar on Speed and Simplicity
Embedded finance has elevated consumer expectations regarding the speed and simplicity of financial transactions, significantly raising the bar for how digital banks must operate. Papuna Lezhava, co-founder and CEO of KEEPZ, notes that consumers assess digital banks based on their best online experiences. They expect intuitive designs that facilitate instant transactions and services that are accessible when needed, rather than facing a cumbersome suite of banking tools. This shift is particularly evident among younger consumers in markets that prioritize mobile experiences. A recent report reveals that 72% of Gen Z and millennials in developed markets now regard digital-only banks as their main financial institutions, underlining the necessity for banks to integrate services meaningfully within wider ecosystems.
Integration as Innovation
Industry leaders recognize that innovation is key. Alex Mifsud, co-founder and CEO of Weavr, points out that companies like Klarna and Stripe have pioneered the embedding of financial services within consumer activities ranging from shopping to mobility. While businesses may be slower to adopt these solutions, the integration of financial services into critical workflows will reshape customer expectations significantly. As companies rely on SaaS solutions to manage core operations, the demand for embedded finance will grow, transforming both customer experiences and the banking sector itself.
Heightened Demand for Personalization
The expectations for personalized service have also risen dramatically. Ben Goldin, CEO and founder of Plumery, emphasizes that today’s consumers anticipate tailored financial services that meet specific needs rather than generic offerings. They compare banking experiences not just across other banks but also to any platform that provides seamless digital interactions. The focus has shifted from transactional elements to experiential satisfaction, meaning digital banks must now integrate features into customers’ day-to-day lives. A successful digital banking experience must not only be efficient but also proactive and contextually aware.
Trust and Security Remain Paramount
Yet, as embedded finance proliferates, trust in these financial solutions remains a fundamental concern. Brian Gaynor, VP of product and CEO of BlueSnap Payment Services Ireland, emphasizes the importance of maintaining security and compliance in users' hands. By embedding payment services into everyday digital experiences, consumers now expect one-click payment options as standard. This expectation places pressure on banks as they collaborate with third-party payment providers to ensure security and efficiency in domestic and international transactions. The relationship between banks and embedded service providers must be strategic, establishing necessary trust while ensuring high service reliability.
Availability of Localized Payment Methods
Ciaran O’Malley, director of sales for Airwallex, adds that the demand for seamless and personalized experiences has never been higher. Modern consumers exhibit low tolerance for complex processes that hinder straightforward transactions. The integration of financial services within platforms allows businesses to create cohesive customer experiences, which is emphasized by research indicating that 80% of UK consumers would abandon their shopping cart if preferred payment methods were unavailable. Providing localized payment solutions becomes essential for operating in diverse markets, making embedded finance a crucial focus for digital banks seeking to remain competitive.
From ‘Mobile Banking’ to ‘Banking Anywhere’
Finally, Varun Monteiro, CEO of Finity, concludes that as financial services embed themselves in everyday applications, consumer expectations shift from simple mobile banking to a seamless "banking anywhere" experience. Today's consumers demand financial services that operate efficiently within their daily routines without their conscious awareness. Digital banks must elevate their offerings by leveraging data and insights, proactively engaging with customers, and becoming more integrated within broader systems.
This expectation for “banking anywhere” reflects a significant transformation in consumer behavior, where financial transactions are not viewed as isolated events but rather integrated into various aspects of life. For instance, whether it's applying for credit at a checkout, effortlessly splitting a bill in a food delivery application, or automatically saving spare change from purchases, consumers seek convenience that doesn’t require them to navigate away from their preferred platforms. This gradual shift signifies that digital banks can no longer merely focus on providing attractive interfaces; they must also prioritize how their services can be embedded within everyday activities in a frictionless manner.
Moreover, Monteiro emphasizes that partnerships will play a crucial role in this new landscape. Banks that can successfully integrate their services with other platforms or power third-party applications behind the scenes will gain a competitive edge in a rapidly changing financial ecosystem. This evolution calls for a strategic approach to collaboration, whereby banks not only extend their capabilities but also enhance the overall user experience.
As embedded finance continues to evolve, it is reshaping customer expectations of digital banks in fundamental ways. The need for convenience, personalization, and seamless integration into daily life is prompting digital banks to rethink their strategies and adopt new technologies that can facilitate these demands. Trust and security remain paramount, ensuring that customer confidence is upheld in a rapidly changing landscape.
Industry experts agree that the integration of financial services into diverse platforms is not just a trend; it is a necessary shift that will define the future of banking. Digital banks must adapt to these expectations by offering proactive, context-aware solutions that blend seamlessly into consumers’ lives. The race for innovation will not simply be about enhancing existing banking services but about creating holistic experiences that redefine what banking means in an interconnected world. As these changes unfold, the financial sector stands on the brink of a new era, one that prioritizes the customer experience above all else, heralding a future where banking becomes an invisible yet integral part of our everyday transactions.
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