Why Europeans are switching: The attraction of embedded financial services

Embedded financial services are increasingly becoming the preferred choice for European consumers. The prime reason for this preference is the easier access to these services when compared to traditional banking institutions.

A recent study undertaken by Solaris in conjunction with Roland Berger divulged these findings. This study titled ‘Disrupting the value chain for financial services – How to drive revenue growth with embedded finance’ encompassed the opinions of 1,600 consumers. These participants were evenly divided across four dominant European markets: Germany, Italy, Spain, and France.

In the study, 41% of the respondents identified product accessibility as their primary reason for utilising embedded financial services. This inclination can be traced back to straightforward applications and expedited KYC procedures. Following closely behind, 39% of participants appreciated the robust availability of embedded finance solutions during checkout. Additionally, 32% praised the enhanced user experience and 31% favoured added perks like loyalty schemes and cashback offers.

With the evolution of payment methods moving towards cardless and cashless options, digital wallets emerged as the top choice for 36% of consumers. This was succeeded by credit cards at 34% and online bank accounts at 28%. Interestingly, while 18% of European participants highlighted the buy-now-pay-later (BNPL) option, it became the most favoured choice for 51% of German respondents.

Solaris Chief Commercial Officer Jörg Diewald said: “The market for embedded financial products is increasing in maturity. In recent months, we have seen that the need for faster, safer and more attractive financial products is at the heart of our partners’ response to customer behaviour. Digital financial services from brands are no longer just a trend, but are establishing themselves as a serious alternative to traditional banking products.”

Another finding of the study revealed that a considerable 48% of consumers have availed an embedded finance product from e-commerce platforms. This was succeeded by retail at 42%, travel at 31%, and transport and mobility at 29%. Highlighting the study’s implications, Diewald added: “The research demonstrates the potential that brands have to grow their customer base by offering multiple embedded finance solutions. For consumers, this could include a debit card from a favourite brand that offers loyalty rewards, a point-of-sale loan to spread the cost of a purchase, or an insurance product tailored to the contents of the shopping cart.”

Nevertheless, 61% of consumers expressed that data security remains their paramount concern when adopting embedded finance products. This was followed by transparency concerns at 42% and trust issues at 33%.

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