" class="no-js "lang="en-US"> Banks racing to meet consumer demand for embedded finance
Tuesday, December 06, 2022

Banks racing to meet consumer demand for embedded finance

Next-generation core banking platform Tuum has published new data today that reveals significantly strong levels of consumer demand for embedded finance products. The survey highlighted a high demand from consumers for services like insurance and loans at the checkout as opposed to sourcing separately, but only if the process of doing so is simple and straightforward. Banks are recognising this appetite too, with embedded finance cited by 84% as a new priority revenue stream. The study was carried by Sapio Research on 2,000 consumers and over 106 IT decision makers in financial services in the UK.  

Tuum’s research found 44% of consumers are likely to want to take out insurance on items like holidays or mobile phones at the checkout; 41% would like ‘Buy Now, Pay Later’ (BNPL) options, and 34% would be likely to take out loans for high value items. While most banks (64%) don’t currently offer these services, they do have it on their roadmap for the next year, with 31% of these banks planning to have services ready to offer as a plug-in for third-parties to deliver to consumers within the next six months.  

For banks and service providers, the size of the opportunity is huge – an Accenture report estimates embedded banking could capture 26% of global SME banking revenue by 2025. Undeniably from Tuum’s data, however, the opportunity only comes alive if consumers are offered products in a clear, friction-free way. 38% of consumers have considered taking out either insurance, BNPL, or a loan but ultimately didn’t, with 21% of these saying the process was too complicated, 18% said it was because the service wasn’t offered to them, and 8% simply forgot.  

Commenting on the research findings, Tuum Co-Founder and Chief Banking Officer, Rivo Uibo said: “As consumer demand for easy, integrated finance options rises, this data confirms a trend we’ve been seeing for some time; banks rising to the challenge and changing their business strategy to position themselves as ‘infrastructure providers’ in addition to offering traditional banking services. By powering finance through consumer-facing third parties like retailers, banks can create new revenue streams and ensure they remain relevant. The savviest in the industry know the size of the technical lift this change entails, and next-generation core banking technology is growing in popularity as a means for banks to be able to support growth of embedded banking services.” 

The research also provides insight to banks, retailers, and service providers on embedded finance products consumers are most interested in. Interestingly, consumer demand aligns with banks’ product roadmaps too. Insurance tops the list of embedded services banks are planning to offer (44%), followed by being able to select the currency in the payment process (48%) and offering BNPL payment options (44%) and loans on consumer products (25%). Of 18% of banks already offering their technology and embedded finance capabilities to third-parties, insurance (74%), loans (47%) and BNPL (42%) also topped the most popular and lucrative services.  

Consumer demand for embedded finance   

   

Insurance   

Buy now pay later  

Loans  

Utilities   

44%  

42%  

14%  

Consumer technology   

40%  

52%  

7%  

Retail items   

19%  

72%  

9%  

Wholesale items   

27%  

62%  

11%  

Leisure activities   

33%  

53%  

14%  

Travel   

70%  

22%  

8%  

Cars and other vehicles   

42%  

21%  

37%  

Tuum, formerly Modularbank, is a next-generation core banking platform provider. Its technology enables banks, fintechs and traditionally non-financial companies to roll out new financial products and services quickly and easily and empowers them to get involved in embedded finance.  Tuum is trusted by an ever-growing list of regulated banks and fintechs. Just last month, it announced it has been selected by fintech-focussed bank, LHV UK, to power the technology of its entire core banking operation. 

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