Ask anyone in fintech what the next big thing to disrupt the financial landscape will be and top of their list will be embedded finance. Ever since it started hitting headlines back in 2019 when Angela Strange proclaimed “every company will be a fintech company” we’ve seen countless examples of companies finding new ways of powering their payments, banking, lending and insurance offerings with fintech, from the ‘buy now, pay later’ options offered at checkouts in ecommerce stores to embedded banking services such as Shopify Balance.

But for those not in the fintech bubble, is embedded finance really the big deal we champions of the industry make it out to be? And what are companies really looking for in an embedded finance offering? To answer that question, OpenPayd recently commissioned the largest ever independent study of attitudes towards embedded finance, surveying 150 decision makers from companies across Europe for a view from outside the fintech bubble. What we found is a unique forecast on the future of embedded finance in Europe.

Hype doesn’t equal preparedness

One of the most striking insights from the research is that the buzz surrounding embedded finance has gone mainstream. All companies surveyed say they are aware of the term ‘embedded finance’. Decision-makers across Europe are discussing it and what has them most excited is the prospect of offering new personalised solutions, more seamless customer journeys and new ways to add value to the customer experience. 

Driving this surge of interest in embedded finance from outside the space is the desire to capitalise on changing consumer views. The pandemic gave consumers a taste for fintech-fueled finance that connects and personalises their experiences across third-party ecosystems. Now they can’t get enough of it. In fact, when asked what might drive a faster rollout of embedded finance services, customer demand came out on top. 

What’s holding them back?

Fintech talent has already been in short supply over the last few years. With two thirds (67%) of all companies planning to build a new internal fintech team to develop their embedded payment offers, the ‘expertise squeeze’ will get even tighter. 

There are few ways companies can alleviate the problem, but at OpenPayd we’ve always believed that diversity is the fuel for innovation. When you are trying to build and deliver software solutions for diverse groups of end customers, it pays to be diverse by design. 

By nurturing underrepresented talent, with unique experiences and voices, from the classroom to the workplace, you not only fill your workforces with otherwise untapped talent, you also build better products that serve the needs of more people.

Another challenge is the struggle companies face in finding the right operational support to build and scale a fintech proposition. With the dearth of information about embedded finance for businesses to wrap their heads around - technical and compliance perspectives and everything in between - businesses know that having the right support will make a difference in their success. Industry expertise, the ability to grow revenue and implementation speed were the top reasons companies are choosing to partner with third-parties, alongside building an internal fintech team.

This prioritising of partnerships is wise, because the task of becoming an authorised provider of embedded finance is a rigorous ordeal. Companies have to make sense of the services they offer and what regulations apply. Depending on the service, those looking to build services themselves might have to become a payments and/or electronic money institution, an authorised account information service provider (AISP) or a payment initiation service provider (PISP). If that wasn’t complex enough in the future, new financial regulations and regional differences will only add to the headache of scaling an embedded finance offering.

Viva la revolution

We’re on the cusp of a revolution in finance powered by fintech. Cashless payments now outpace cash and soon, white-label banking, lending and insurance will overtake conventional banking players. Finance is fading into the background but fuelling all our everyday experience. The ‘finance’ in embedded finance may be harder to see but that’s the way consumers and B2B customers increasingly prefer it – so convenient that they don’t have to think about it. 

Embedded Finance is a €720 billion opportunity in Europe and carving out a slice of it will take more than just hype. No matter what companies are planning, knowledge and talent will be the key pillars of success. There are many partners now who can offer advice and services so companies aren’t reinventing the wheel on their embedded finance journey and can help to maximise this crucial new revenue stream.