In the dynamic world of consumer Embedded Finance, Buy Now, Pay Later (BNPL) services have become a game-changer. They offer shoppers greater flexibility and convenience. BNPL allows consumers to make immediate purchases while spreading payments over time, often without interest. Its popularity skyrocketed during the pandemic. Fuelled by the e-commerce surge, it continues to play a pivotal role in shopping habits. Recent surveys reveal that 39% of U.S. consumers plan to use BNPL within the next six months.
This growth isn’t confined to the U.S. It’s a global phenomenon. U.S. fintech giant Affirm recently launched its BNPL services in the UK, marking its first international expansion. Affirm selected the UK due to strong demand from merchants eager to incorporate flexible payment options into their offerings.
The BNPL boom reflects a broader trend in Embedded Finance, which integrates financial services seamlessly into non-financial interactions. BNPL, for instance, embeds financing directly into the retail experience. This allows consumers to access payment plans as part of their shopping journey. This integration simplifies the traditionally separate processes of purchasing and financing, creating a smoother, more user-friendly experience.
Optimising customer experience for Embedded Finance
The value case for Embedded Finance is based on this seamless customer experience and the opportunities it offers to enhance the services offered. Partner companies are able to provide financial services without having to maintain extensive and complex financial infrastructure, leveraging technology to facilitate these offerings instead.
Already, several opportunities are emerging that are poised to propel the growth of embedded finance into new sectors and applications. Banks and retailers should be prepared to seize opportunities from embedded insurance products, embedded wallets in non-financial apps, and new forms of embedded lending that go beyond the existing BNPL instalment model.
Consolidating Services
However, to succeed in this next phase, financial service providers and their partners will have to keep pace with and be ready to adapt to changing consumer preferences and requirements. Staying ahead of the curve takes more than just improving individual interactions. It involves curating a comprehensive journey that aligns with consumers’ expectations for simplicity, transparency, and flexibility. People are increasingly seeking a mobile-first platform that caters to both their financial and non-financial needs in a single, unified space. Driving further consolidation of customer journeys through Embedded Finance is likely to be a critical strategy for industry leaders in the next wave of adoption.
Advancements in open banking protocols and the rise of new FinTech ventures are setting the stage for more integrated financial and non-financial services, further blurring the boundaries between these two traditionally distinct customer journeys. Emerging trends in Generative AI and conversational banking will also contribute to the enhanced customer experience. These technologies are set to shape consumer expectations, with more and more people looking to access support and services through conversational experiences. Embedded Finance is no exception.
New Opportunities
For financial service providers, embracing these trends opens myriad possibilities. Leading the charge in Embedded Finance can contribute to customer acquisition, generate direct revenue from the new services offered, and enable cross-selling of other financial products.
For partners within the Embedded Finance ecosystem, the opportunities are equally substantial. As well as driving Net Promoter Score (NPS), they can unlock new referral or commission-based revenue streams.
It’s clear that the future of consumer finance is deeply linked to the progress of Embedded Finance. As more offerings beyond BNPL emerge, the boundary between financial services and non-financial experiences can become increasingly blurred. For providers and partners ready to embrace this change and leverage it to meet evolving customer needs, this represents a substantial opportunity.
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