Embedded Finance: Unlocking the Next Wave of Growth
- By CDOTrends editors
- November 21, 2022
Embedded finance has made it easier for customers to access tailored financial services when needed. This simplifies the checkout process and offers more convenience and flexibility in making payments. From in-app payments to Buy Now, Pay Later (BNPL) services and insurance, customers can access a range of financial services in just a few clicks.
A recent survey conducted by FIS found that 60% of respondents in Hong Kong said they had used embedded payments within a brand's app, with 22% saying they do so at least once a month. This indicates the increasing popularity of this payment method. Furthermore, 35% of respondents told FIS that they have also used Buy Now, Pay Later (BNPL) services as part of their embedded finance experience.
Embedded insurance, which is the purchase of insurance directly from a merchant, such as for air travel, has also seen an uptake. 37% of respondents stated they had purchased this type of insurance.
According to respondents, speed, convenience, and loyalty are essential drivers for adopting embedded payments and insurance.
The outlook is even more optimistic, with significantly more consumers saying they plan to use these services. A majority stated they are either likely to or will definitely engage in embedded payments (76%), embedded insurance (64%), and/or embedded lending (61%) in the future.
Embedded finance in the metaverse
As embedded finance continues to evolve and become more widespread, the metaverse is likely to be a key development area. Many industries have already embraced the virtual world, including gaming and retail, and this could be the perfect environment for embedded finance to thrive.
With 42% of Hong Kongers already planning to access and engage in the metaverse for gaming purposes, and 34% planning to do the same for shopping reasons, there is great potential for embedded finance in this space over the next 12 months.
Although those surveyed by FIS showed that there is still room for improvement before embedded finance can be maximized, lack of awareness was revealed as the number one reason people have yet to engage in all three forms of embedded finance.
Fraud was the second most common reason for not engaging in embedded payments. At the same time, uncertainty over regulation and licensing was the second primary barrier to entry into embedded lending and insurance.
“As one of the key global financial hubs, we are seeing continued evidence of traditional financial institutions in Hong Kong partnering with fintechs and merchants to unlock embedded finance use cases, especially for payments and lending. Looking forward, Hong Kong is primed for rapid growth in the deployment and use of embedded finance services as a majority of consumers surveyed by FIS said they plan to tap into the convenience of these services in the next year,” said Kanv Pandit, group managing director in APAC for banking solutions at FIS.
Pandit further said that it is time for merchants and businesses to tap into the power of these services and use them to entice and delight customers with an advanced shopping experience. He added that doing so will help merchants capture the next wave of growth in the post-pandemic era.
Image credit: iStockphoto/Feodora Chiosea