Research by Solarisbank and the Handelsblatt Research Institute has found considerable conversion potential for e-commerce providers to offer financial services in Germany, confirming the significant opportunity embedded finance may hold across Europe.
Embedded finance, defined in the report as the “integration of financial services into products and business processes of non-banks” is becoming increasingly relevant to fintech, due in large part to the influences of Open Banking and digital transformation across traditional financial services.
The report explains that customers are increasingly taking a different approach to traditional financial services, because the former USP and pillar for banks of trust, built namely through vast branch networks, is no longer in demand. The focus for customers has instead shifted toward the service of banking itself.
Examining the ‘conversion potential’ of embedded finance on the basis of the e-commerce sector in Germany, the report analysed 21 leading e-commerce providers in the country spanning retail segments of fashion, electronics and media, hobby and DIY furniture and household, groceries and toiletries, with regard to their interaction rates with the customer and customer satisfaction.
A ‘representative survey’ was then conducted to directly determine the usage of the 21 e-commerce providers and the willingness to obtain financial services from these brands.
This found that 61% of Germans can imagine using an integrated financial service (embedded finance) from at least one of the e-commerce providers listed.
In response to the question: “Would you use one or more of the listed banking/payment products from the online stores of the following companies?”, more than 15% of respondents said they would use a checking account from one of the 21 brands listed.
Amazon claimed the highest approval rating with 28.2%, meaning that over one quarter of respondents would be willing to use a checking account offered by Amazon.
Willingness for e-commerce based credit cards and installment payments were lower at 11% and 6% respectively, however Amazon again ranked highest for the credit card hypothetical, suggesting a correlation between the intensity of customer touchpoints and the willingness to consider a business’s embedded finance offer.
Dr. Roland Folz, CEO of Solarisbank commenting on the findings states that "the potential for embedded finance in Germany and Europe is massive […] Several leading brands such as Samsung, Apple or Amazon already identified the benefits of embedded finance early on. They can increase customer loyalty, boost the number of customer touchpoints and generate additional revenue.”
“We see the greatest potential in companies with customer-centric business models that make intelligent use of customer data. If they now enrich this knowledge with the payment behavior of their customers, they can offer tailored financial products of a quality indistinguishable from that of a personal financial advisor."