European brands increasingly looking at embedded finance, but barriers still exist

By Gaia Lamperti

By 2026, embedded finance is expected to add an additional €720 billion in revenue in Europe, as 73% of brands plan on launching embedded financial services in the next couple of years.

These are the findings of the largest ever independent study on brands attitudes towards embedded finance, Embedded finance surge to net €720bn for European brands by 2026, conducted by OpenPayd, a leading global payments and banking-as-a-service (BaaS) platform committed to providing businesses with a fully compliant solution across all markets..

Conducted by Coleman Parkes last July, the survey included 150 senior executives from B2C and B2B marketplaces among the respondents, as well as horizontal and vertical SaaS brands and gig economy platforms across the UK, France, Germany, Italy, and Spain.

“It’s promising to see more and more customer-centricity from brands, who are anticipating mass shifts in consumer need and making ambitious plans to launch embedded financial services,” said Iana Dimitrova, Chief Executive at OpenPayd.

The top three most appealing aspects of implement embedded finance offerings for brands are retaining front-end customer experience (85%), increasing the number of customer touchpoints with their brand (84%) and offering mobile wallet or current account options to customers (79%), as they were named by respondents to the OpenPayd survey.

Yet, the appetite for embedded finance does not match preparedness. An abundant 95% of the companies surveyed admitted they still not fully understanding what the term means, and many encounter challenges in hiring FinTech talents, as demand already significantly outstrips supply, and this looks set to intensify.

On average, across the four main sub-sectors of embedded finance (banking, payments, insurance, and lending) respondents expected to increase their current revenues by 7% over the next two years, 11% over the next five years and 15% over the next ten years.

“We’re on the cusp of an embedded finance revolution across B2C and B2B sectors, which will peak in the next two years,” Dimitrova added. “However, navigating the complex maze of infrastructure providers with limited in-house experience slows down value creation of the otherwise significant €720 billion opportunity in Europe alone. No matter what, retailers, service-driven companies and all those in between are planning, partners will be essential – helping to navigate the complexities and to innovate ahead of demand.”

In this context, partnerships will be extremely important, but most respondents, who were senior executives from brands generating a minimum of €60 million in annual revenue, are unable to name appropriate embedded finance/BaaS partners.

According to the report, brands enthusiasm towards embedded finance ranges across different types of services, including:

• Embedded banking: 6% already offer embedded banking to customers and nearly all (92%) plan to offer it in the next five years.
• Embedded payments: 4% of respondents said they already offer embedded payments to customers and 83% plan to offer in the next five years.
• Embedded insurance: No respondents reported that they already offer embedded insurance to customers and only 28% plan on doing so in the next five years.
• Embedded lending: No respondents reported that they already offer embedded lending to customers and less than a quarter (23%) plan to offer it in the next five years.