Why embedded banking adoption is on the rise

By Puja Sharma

New research from Vodeno/Aion Bank has revealed how embedded banking adoption is significantly boosting brand loyalty for companies, with consumers more likely to use embedded banking products from brands as a result of the cost-of-living crisis.

The European Banking-as-a-Service (BaaS) provider’s study revealed that over a third (37%) are more likely to seek out brands that offer BNPL and flexible payment options due to the high cost of living, with this figure rising to 50% in the 25-34 age range. Competitive prices are cited as the most important factor to 44% of consumers when it comes to their brand loyalty, closely followed by a good selection of products (43%).

The results highlight that the availability of embedded banking products directly in the websites and apps of consumer brands is starting to make an impact on customer loyalty, with two in five (40%) consumers say they will only stay loyal to brands that offer financial benefits like BNPL and cashback, with this figure rising to 50% among 25-34-year-olds. When it comes to engagement with loyalty programs, just under half (46%) said they are more likely to use a brand’s loyalty card to make purchases if it included BNPL. This figure was highest amongst the youngest consumers surveyed, rising to 53% for those aged 16-24 and higher still (65%) in the 25-34 demographic.

When consumers were asked how often they shop with their favorite brands, 19% of respondents said ‘monthly’ and a further 16% said ‘once every two or three weeks’. However, among those who have used a brand’s embedded banking product, 36% said they return to that brand’s app or website between three and five times a month, with this figure rising to 43% among the 25-34 age group.

Vodeno/Aion’s research highlights the commercial and loyalty benefits of embedded banking, with just under one quarter 23% saying they are more likely to recommend the brand to friends and family, while the same number (23%) said they are more likely to spend money with the brand over competitors.

Kim Van Esbroeck, Country Head for Aion Bank Belgium and Chief Revenue Officer for Vodeno/Aion said, “The benefits of embedded banking cannot be ignored, and our research offers strong evidence that consumers are not only using these products, but it is also positivity influencing their loyalty to BaaS-enabled brands.

Competition for the consumer has never been more fierce, particularly in these difficult financial times, and brands that offer flexible payment and lending options provide more choices, which can boost consumers’ spending power when they need it most. Embedded banking is also making an impact on brand loyalty, with 43% of 25-34-year-olds saying they shop more at brands that offer an embedded banking product. We have already seen how BaaS-enabled embedding banking is helping to innovate customer journeys, and the next area of disruption will be to supercharge brands’ loyalty programs.”  The survey conducted on 3,007 European consumers based in the UK, Belgium, of and Germany has found:

Key highlights:

• Two in five European consumers will only stay loyal to brands that offer embedded banking products like Buy Now, Pay Later (BNPL)
• Around 37% are more likely to use BNPL and flexible payment options due to the cost-of-living crisis
• Embedded finance increased customer engagement with brands for over a third (36%), those who said they return to that brand’s app or website between three and five times vs once a month