Pathward’s new report – Embedded Finance – Executive Perspectives shares how executives view a growing trend that’s set to grow almost fivefold to $248.4 billion by 2032. One key takeaway is there is opportunity for consultants to assist with strategy and implementation.
Most senior executives, 77%, are aware of embedded finance (if only to a point). For 53%, it is a primary revenue driver. Close to half, 44%, work at companies that already offer it, while 33% plan to and 17% are considering it. Of those considering it, 39% believe embedded finance will come within a year, while 82% will see it come within two years.
Larger companies are embracing it more than smaller ones, threatening to widen the gulf between them. More than half, 53%, of senior leaders at companies with annual revenues of at least $50 million offer embedded finance, compared to 34% at sub-$50 million firms.
At 47%, business development is the most common champion pushing embedded finance. They’re followed by IT (42%), leadership (40%) and finance (36%). Many are motivated by the faster access to funds, cited by 40% as a top benefit. Slightly more (41%) indicate the ability to collect more data.
Almost half, 49%, say they are very familiar with embedded finance. Of those, 58% say companies must embrace it to meet consumer demand. The 51% who admit to being unfamiliar with embedded finance understand the concept but don’t have strong knowledge of the details.
Once they learn more, their attitudes change; 58% of those who are very familiar with embedded finance consider it a necessity, much more than the 44% of those less familiar.
One of the lessons the more educated learn is that embedded finance is more complex to implement than they thought. Virtually all, 96% of senior executives from companies offering embedded finance admit underestimating the complexity of implementation. Almost half, 45%, significantly underestimated it. Even most who believe they are very familiar with it significantly underestimated it.
Many report issues with embedded finance; 60% cite costs, including starting up and integration (39%) and ongoing costs (34%). More, 63%, simply lack know-how, while 26% don’t know who to partner with.
One-third, 35%, of senior executives believe their company needs more expertise to help with overall strategy and implementation. A similar number, 31%, need assistance with daily details and operations, while 35% need help with both.
Faster payments (52%), convenient payments (50%), and flexible payments (49%) are the top benefits for consumers. Other popular answers are transparency (43%) and lower fees (38%).
Top fears are security and fraud (59%) and a poor CX (41%). Of those who believe the customer payment experience is very important, the latter jumps to 71%. Compliance is another top worry.
If done correctly, embedded finance addresses these concerns. Almost 40% say security is a top feature.
Senior executives seek outside support for many reasons. They include back-end integration (52%), maintenance and troubleshooting (49%), and design/UI (42%). Roughly 38% need help with their monetization strategy.