Embedded finance has evolved from merely a future promise to a mainstream reality. According to McKinsey, embedded finance generated an estimated €20-30bn in Europe in 2023, and that number is growing. Today, it is so pervasive that, even if it is not recognised explicitly, most people encounter it in their daily lives.
For instance, anyone shopping online has seen embedded finance in action, usually as an opportunity to spread payment over a fixed period, writes George Toumbev. Chief Commercial Officer, NatWest Boxed.
Embedded finance is also expanding to other use cases beyond just Buy Now Pay Later service options. According to new research, point-of-sale (PoS) credit was indeed the most popular product, offered by 62% of those surveyed. However, savings accounts, insurance, and merchant wallets were almost as popular, despite not being products commonly associated with embedded finance.
Embedded finance is on the rise – and for good reason. In the same study, 78% of consumer brands that have implemented it reported boosts in customer loyalty, average order value and conversion rates.
Here’s the catch: the success of embedded finance is now placing new demands on embedded finance providers, and some providers haven’t caught up just yet. Brands today rank customer excellence above operational or technical excellence, yet only 53% believe their current provider delivers on it.
What is driving the imperative for customer excellence? Grocery shoppers are facing increased inflation rates for the fifth successive month, and the fastest rate since January 2024. Prices are continuing to rise.
Customers expect to feel valued and to see that brand deals and offers provide meaningful, long-term benefits for them. As a result, customer experience, including the support provided, is becoming a key differentiating factor. How can embedded finance providers and their brand partners step up to meet these rising expectations?
Why grocers are embracing embedded finance in the first place
An embedded finance strategy emphasises long-term goals, like driving customer loyalty and building sustainable revenue streams.
Retailers and grocers gain two main advantages from embedding financial services. The first is improving the customer experience through convenient financial options like BNPL at checkout. Or, for instance, lesser-known solutions like branded savings accounts. As grocers continue to seek differentiators, offering effortless and trusted ways to save within their existing ecosystem can help brands stand out and deepen relationships with customers, as well as attract new ones. Today, one in three UK consumers already holds a savings account with a non-bank brand, with Gen Z and millennials driving this trend.
The second is that grocers can get valuable customer insights from embedded finance solutions that could enable them to offer personalised services that foster even long-term engagement. Data like spending habits, preferences, and engagement patterns can help grocers recommend specific products or loyalty rewards and offer flexible payment options. When asked to choose what direct impacts embedded finance has had on their business, increased repeat purchases (41%) and increased customer conversion rates (38%) came out on top for retailers. The success of embedded finance is clear. It’s a mature technology with consumer demand, no longer disruptive and experimental.
The shifting demands of embedded finance
The truth is, as a result of its own success, the criteria for delivering embedded finance now go beyond technology. If most brands that have implemented embedded finance have seen positive outcomes, it means new areas of focus will emerge. A reliable and easily embedded API, backed up by an excellent tech stack, is now entry-level for any provider.
There’s a growing expectation that embedded finance providers must also excel in customer service. Providers need to focus on delivering accessible and reliable support to end-users and ensuring a positive customer experience, in addition to maintaining their technical capabilities. The shift in expectations is likely driven by the rise of support queries linked to embedded finance.
While 85% of retailers and grocers that launched an embedded finance product saw a spike in customer support enquiries, only 32% say that their provider offered customer support that was as good as their own. On the other hand, only 47% of brands believe that their current provider will be able to handle increased customer intake without delays or downtime. Brands need a trusted partner who can support their growth ambitions and can scale with them. It’s also important that a provider can reinforce a brand they have so carefully built.
Meanwhile, the regulatory requirements for embedded finance are changing. Regulations such as Consumer Duty and upcoming BNPL rules mean that providers who can demonstrate strong compliance and are proactive about supporting future regulatory changes are well-positioned to win the trust of grocers. If providers can handle the complex world of regulatory frameworks, real-time risk monitoring, and robust reporting, brands can focus on their main business day-to-day.
So what makes embedded finance a real success?
In the initial stages of any innovative product, technical excellence is prized. Brands require assurance with recognised and trusted embedded finance partners who can deliver on their promises, swiftly resolve issues, and rapidly bring products to market ahead of competitors. However, success in this space requires more than technical capability; grocers are turning to trusted embedded finance partners that can navigate the often-competing worlds of customer expectations, operational complexity, and regulatory demands.
Providers must understand what grocers truly value in a partnership to drive sustainable growth – and only those that are willing to meet shifting priorities will be able to stand the test of time.
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