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July 16, 2021

[Report] Embedded Finance: Financial services whenever and wherever customers need them

Eric Sager

Financial services is in the midst of a broad-sweeping digital transformation that is changing how, when, and where people interact with financial services and manage their financial lives. We are still in the early stages, but across every segment there is a market transition as consumers want to do everything digitally and increasingly expect more connected experiences. 

Plaid partnered with Accenture to produce a report exploring embedded finance, an emerging area of opportunity that will have far-reaching effects on the future of finance, and how firms are looking to harness the opportunity. Embedded finance enables businesses to seamlessly integrate financial services into their business models, consumer experiences and existing workflows through APIs – e.g. seamless payments in your Uber or Starbucks app, a microloan at checkout from an online store, or allowing car buyers to instantly acquire tailored insurance during the purchase process. It enables digital finance to be integrated into consumers’ lives to provide banking, credit, payments, insurance — whatever the need — efficiently, in context and at the point of need.

It is our belief that, in the next few years, most enterprise companies will make significant moves into embedded finance. Existing banks and financial institutions, as well as non-financial enterprise companies, want new ways to attract, retain and drive greater customer lifetime value. They also want to reduce acquisition and customer servicing costs. Embedded finance can potentially deliver all of this, and more.

  • It can add $230B in revenues for financial services providers by 2025, according to Lightyear Capital

  • It can allow companies to increase revenues between two and five times per customer, according to Andreessen Horowitz

Embedded finance is already a priority for many companies. For the report, Accenture surveyed more than 1,000 non-financial companies (director level and up) about their embedded finance strategies and nearly half (47%) of U.S. respondents said their companies are already investing in embedded finance offerings. More impressive is that respondents reported strong early success – those that have started to implement embedded finance strategies said they were either “successful” or “very successful” at increasing engagement levels (88%) and at attracting or acquiring new customers (85%).

Embedded finance may change the competitive dynamics of many industries, and there are opportunities for virtually any company to participate, either by building first-party services or partnering with others in the growing digital finance ecosystem. Companies with no current financial offerings, as well as banks and other financial institutions that embrace embedded finance for their own services or to enable others, could have long-term strategic advantages over those who don’t.

  • Accenture Research found that among those already implementing embedded finance solutions, 70% of respondents said they are working with partners by buying, or licensing technology as part of their embedded finance strategy – a clear sign that non-financial companies value what experienced providers can bring.

The time to act is now – examples of digital finance are everywhere today, but we are still in the early stages of the broader digital transformation and opportunities exist in almost every segment of the market. Download the report to learn more and reach out to Plaid to discuss how we can help your company incorporate embedded finance into your strategy.