# The rise in embedded financial products:  is the new norm of banking?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-23
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: The Rise of Embedded Finance: A Game-Changer for Financial
Meta Description: Discover how embedded finance is simplifying financial processes and changing consumer expectations, with insights on who is embracing embedded services and
URL: https://financedigest.com/the-rise-in-embedded-financial-products-is-the-new-norm-of-bankinghtml

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_By_ **_Rivo Uibo,_** _Co-Founder and CBO at Tuum_

**Embedded Efficiency**

We have recently seen a [rise in the demand](https://www.financedigest.com/oil-rises-on-demand-hopes-as-banking-crisis-fears-subside.html "Oil rises on demand hopes as banking crisis fears subside") for embedded finance products. Embedded finance is essentially the use of financial tools or services, such as lending or [payment processing](https://www.financedigest.com/are-your-payment-processes-in-cheque-for-the-new-legislation.html "ARE YOUR PAYMENT PROCESSES IN CHEQUE FOR THE NEW LEGISLATION?"), provided by a non-financial provider. It simplifies [financial processes for consumers](https://www.financedigest.com/uk-consumer-mood-hits-one-year-high-but-financial-gloom-persists.html "UK consumer mood hits one-year high, but financial gloom persists"), making it easier for them to access the services they need. For instance, embedded payments on apps, BNPL or embedded insurance on your car, all streamline the purchasing [process and close](https://www.financedigest.com/can-digital-labour-displace-cfos-in-the-close-process.html "CAN ‘DIGITAL LABOUR’ DISPLACE CFOS IN THE CLOSE PROCESS?") the gap between company and consumer. At the point of payment, consumers are often given the choice to utilise these embedded services, and this is ultimately changing the [way in which we expect financial](https://www.financedigest.com/10-ways-to-make-your-financial-model-easier-to-understand.html "10 Ways to Make Your Financial Model Easier to Understand") services to be handled: efficiently and simultaneously. But do consumers welcome this approach and what does this mean for the [future of banking](https://www.financedigest.com/communicating-with-the-customer-is-the-future-of-mobile-banking.html "Communicating with the customer is the future of mobile banking")?

**Who is saying yes to embedded?**

Much of the appeal for [embedded products](https://www.financedigest.com/sugarcrm-embeds-more-data-privacy-controls-in-its-products-for-gdpr-compliance.html "SugarCRM embeds more data privacy controls in its products for GDPR compliance") lies in that fact that it makes processes easier, quicker and more seamless for consumers. Increasingly [people](https://www.financedigest.com/banks-need-to-digitise-financial-wellbeing-support-to-help-young-people-manage-through-this-recession.html "Banks need to digitise financial wellbeing support to help young people manage through this recession") are showing less allegiance to their bank and are more disposed to do banking with non-banks. This is particularly true for younger demographics. Our recent survey found that it is Gen Z and millennials that are more receptive to new and convenient [embedded finance](https://www.financedigest.com/why-embedded-finance-will-be-integral-in-the-future-of-b2b-marketplaces.html "Why embedded finance will be integral in the future of B2B Marketplaces") offerings. For example, when [buying a high-value item or taking out BNPL products](https://www.financedigest.com/over-half-of-britons-say-loyalty-cards-encourage-them-to-buy-a-product-niq.html "Over half of Britons say loyalty cards encourage them to buy a product – NIQ"), people between the ages of 18-38 are approximately 10% more likely to take these out than people aged 39-54 – and more than twice as likely as people over the age of 55. Nevertheless, the overall demand for embedded services is very encouraging. The research also found that 44% of people are likely to take out embedded insurance at the checkout, 42% are likely to take out buy now pay later (BNPL) and 39% are likely to take out a [loan for a high value item such as a car](https://www.financedigest.com/6-reasons-to-take-a-car-loan-from-a-credit-union.html "6 Reasons to Take a Car Loan From a Credit Union") at the point of checkout. It is clear how embedded products are in favour for their convenient and streamlined approach.

**The drawback of embedded services**

Despite the appeal for embedded products, there are still hesitations among some, namely [older generations](https://www.financedigest.com/gen-z-significantly-prefers-user-generated-content-older-millennials-lean-toward-streaming-inmobi-insights-survey-shows.html "Gen Z Significantly Prefers User-Generated Content, Older Millennials Lean Toward Streaming, InMobi Insights Survey Shows"). The level of trust attributed to third party providers that are not [financial institutions remains a key](https://www.financedigest.com/4-key-financial-trends-as-we-approach-2021.html "4 Key Financial Trends as we Approach 2021") concern among consumers. As part of this, retailers and [banks should seek](https://www.financedigest.com/seven-out-of-ten-uk-adults-aged-25-44-never-seek-advice-on-dealing-with-debts-despite-depending-on-the-bank-of-mum-and-dad.html "Seven out of ten UK adults aged 25-44 never seek advice on dealing with debts despite depending on the bank of mum and dad") to educate and inform people that products taken out directly with third parties at the point of sale still abide to the relevant regulation (e.g. the Financial Conduct Authority (FCA) in the UK) and are underpinned by established, [licenced banks](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence"). Another hurdle that was identified in the survey, was the need for simpler and slicker processes and technologies to avoid discouraging customers from taking out [financial services](https://www.financedigest.com/73-of-employees-in-the-banking-and-financial-services-industries-are-looking-for-better-physical-and-mental-wellbeing-support-in-the-workplace.html "73% of employees in the banking and financial services industries are looking for better physical and mental wellbeing support in the workplace") at ‘the checkout’. Across age groups, 40% of people who had already considered using such a [financial product](https://www.financedigest.com/50-of-consumers-wont-spend-more-than-20-minutes-applying-for-financial-products-online.html "50% of consumers won’t spend more than 20 minutes applying for financial products online") said they ultimately decided against it. Critically, aside from simply forgetting or deciding their embedded product wasn’t needed, nearly a quarter (22%) cited the reason for not [continuing with their selected embedded product](https://www.financedigest.com/impact-com-continues-momentum-in-the-first-quarter-fueled-by-client-growth-new-products-and-partnership-events.html "impact.com Continues Momentum in the First Quarter, Fueled by Client Growth, New Products and Partnership Events") at checkout as being because the process was too complicated. There is therefore still work to be done to get embedded [services to be adopted](https://www.financedigest.com/matching-digital-adoption-with-cybersecurity-in-the-financial-services-industry.html "Matching digital adoption with cybersecurity in the financial services industry") with open arms, particularly among older demographics who find the concept of embedded more complex.

**Looking to the** [future of banking](https://www.financedigest.com/the-rise-of-virtual-agents-the-future-banking-experience.html "The rise of virtual agents: the future banking experience")

[Banking is increasingly becoming](https://www.financedigest.com/banks-need-to-become-a-lifestyle-brand.html "Banks need to become a lifestyle brand") faceless, and people are increasingly drawn to taking out finance products directly with the retailer/travel agent/solar panel company rather than buying a product and having to sort out finance themselves. Embedded finance responds to these demands and does embrace the [future of banking](https://www.financedigest.com/bank-of-the-future.html "Bank of the future") in a way that serves the evolving needs of consumers in a digital age. Despite some ‘teething’ [issues surrounding embedded services](https://www.financedigest.com/how-the-financial-services-industry-can-solve-the-issue-of-vulnerable-code.html "How the financial services industry can solve the issue of vulnerable code"), the appeal and the convenience they offer, seemingly outweighs these negatives. Embedded services are undeniably here to stay, and we will be seeing more of them in the future, forward-thinking banks are already onboard with the concept and encouraging third parties to offer embedded [financial services as there are benefits to be had not just for end user but for banks](https://www.financedigest.com/financial-crime-is-the-chink-in-the-banks-armour.html "Financial crime is the chink in the banks’ armour") themselves as they represent new channels for banks to indirectly serve new customers.


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