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European retailers see embedded finance as a revenue builder

Retailers and e-commerce businesses are working with tech suppliers to embed financial products and services in their customer offerings

Two-thirds of European retailers expect to increase their revenues over the next 12 months by embedding financial services into their customer offering.

A survey of more than 750 European retailers and e-commerce companies found that 64% are planning to adopt technology to enable them to embed financial products in their services.

Commissioned by banking-as-a-service (BaaS) supplier Vodeno, the survey also found that 66% of retailers expect embedded finance to increase revenues over the next year.

Non-banking businesses such as retailers, e-commerce companies and distributors are increasingly looking to offer financial products to their customers. This could be credit, loans or even debit cards.

Of the businesses questioned, 41% cited generating new revenue streams as a reason for adopting embedded finance technology, while 40% said it was to grow the customer basket, whilw 40% viewed it as a way of enhancing customer loyalty. Improving customer insights was seen as a driver for 39% of retailers and 38% said they wanted to offer a more convenient checkout experience. 

Tom Bentley, chief commercial officer at Vodeno, said: “The allure of embedded finance for retailers is evident – new revenue streams, enhanced customer loyalty and a more fully rounded business proposition are all priorities for progressive companies looking to step into the world of financial services.

“Our research suggests that the motivations behind embedding banking products into the customer journey vary, but are all underpinned by a desire to remain competitive in the digital-first landscape. Retailers want to make the buying process simpler for the customer, and ultimately deepen that all-important relationship between the buyer and the seller.” 

The survey found that two-thirds of those interviewed (66%) have worked with a tech supplier over the past year to create and embed financial products into their business model. 

“The allure of embedded finance for retailers is evident – new revenue streams, enhanced customer loyalty and a more fully rounded business proposition are all priorities for progressive companies looking to step into the world of financial services”
Tom Bentley, Vodeno

According to interviews with 50 senior business executives and a survey of 1,600 more, carried out by financial IT software supplier Finastra, 85% organisations are already implementing BaaS capabilities or plan to do so in the next 18 months.

Finastra said people were changing where they source financial services and shifting to non-bank channels. “This trend will only accelerate as integrating regulated products into the customer journey becomes as simple as creating a social media account,” it said.

To provide these services, however, businesses need to be regulated and have access to expensive banking tech, so they are instead using financial services offered by banks and fintechs. These services, which are driven by application programming interfaces (APIs), are regulated through the financial firm, which also provides the tech infrastructure.

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