Embedded Finance Turns Checkout Into a Better Customer Experience for Brands

In response to widespread demand for convenience, nonfinancial companies are using banking-as-a-service (BaaS) to seamlessly integrate financial products into traditionally nonfinancial platforms and experiences. Known as embedded finance, this integration of financial services has become immensely popular: In 2021, businesses and consumers spent $2.6 trillion in transactions through embedded financial services in the U.S., according to a Bain & Company report.

Examples of embedded finance are everywhere. Uber is a typical example, enabling users to hail and pay for rides via the same app. Another prominent use is in auto lending, with 70% of auto loans, for example, acquired at dealerships during purchase. Embedded finance is also common in the business world, in which 63% of U.S. business-to-business (B2B) companies offer their customers some form of embedded finance.

The “Embedded Finance Tracker^®” explores how BaaS facilitates embedded finance and how it benefits companies and consumers.

Around the Embedded Finance Space

According to recent research from DECTA, consumers are interested in a range of embedded finance offerings. DECTA found that 54% of Americans favor integrated add-ons such as financing and insurance, and many consumers are also interested in loyalty benefits and same-page checkout capabilities.

Many embedded finance providers might need to step up their games: 55% of software vendors were satisfied with their embedded payment providers’ application programming interfaces (APIs), according to a recent TSG and KeyBank survey. Moreover, just 41% were satisfied with their providers’ customer service quality.

For more on these and other stories, visit the Tracker’s News and Trends section.

Mastercard on How BaaS Providers Can Reach Their Full Potential

The future of BaaS and embedded finance is bright. Driven by consumers’ insatiable need for seamless experiences, BaaS is expanding to support an ever-growing set of services and embedded experiences.

To get the Insider POV, we spoke with Sherri Haymond, executive vice president of global digital partnerships at Mastercard, about what is needed for FinTechs to make the most of embedded finance’s promising future.

BaaS Makes Embedded Finance a Winning Strategy for All

Without BaaS, embedded finance would not be possible. BaaS allows nonfinancial companies to offer financial services quickly and cost-effectively by connecting to banks’ systems through APIs. This benefits everyone involved, from banks to businesses to consumers.

Embedded finance creates a better customer experience by making convenient and popular features such as same-page checkouts and seamless payments possible. These capabilities allow consumers to receive personalized financial services within their favorite brands’ ecosystems. Because embedded experiences create more avenues for consumers to interact with their favorite brands, they promote customer loyalty and engagement. Eighty-eight percent of companies that offered some type of embedded finance option reported increased engagement, and 85% said it helped them acquire new customers.

To learn more about the benefits of embedded finance, read the Tracker’s PYMNTS Intelligence.

About the Tracker

The “Embedded Finance Tracker^®,” a collaboration with Galileo, examines how BaaS empowers nonfinancial companies to become financial service providers and why so many are doing so.