The pandemic challenged many things in the past two years – chief among them is the resilience and relevance of financial services business models; banks and financial institutions are transitioning from being the main character to more of a strategic partner in a wider ecosystem of innovation and technology, where payments, lending, e-commerce, and everything in between have edged their way in. And we’ve seen embedded finance take a huge position in leading the charge forward.

A clear example is the emergence and growth in adoption of “buy now, pay later” players in the e-commerce space; at its core, BNPL relies on instant credit & risk management decision engines that work in real time and aim to improve the online shopping experience – for everyone involved. BNPL has shown to increase stickiness for merchants while improving conversion rates, allowing for more personalization in marketing, and optimizing cash flow management. It’s an interesting case study in the intersection of selling, buying, payments, and credit.

At the heart of the embedded finance upswing is the focus on customer experience & satisfaction. In 2021, a McKinsey report found that across 15 key markets in Asia-Pacific, 97% of respondents said digital channels now provide the best experience when interacting with their bank as part of an omnichannel offering that still includes physical branches.

A follow-up statistic in the report said that while 70% of respondents were open to using digital channels for services beyond transactions, only 20% to 30% said they had purchased a banking product (i.e., savings account, loan or credit card) via a mobile app or online.

And this is just in the APAC region, where it is estimated that as many as 73% of the population is still classified as “unbanked” or “underbanked;” the opportunity in more technologically advanced ecosystems is clearly an exciting prospect.

So while the pandemic has accelerated the disruption in the financial services industry – and beyond – we can’t let our feet off the proverbial gas pedals. Embedded finance is here to transform industries where a frictionless digital user experience is crucial to customer retention, growth, and continued relevance.