Description
Embedded finance is the integration of banking services into the everyday lives and work of customers. It creates contextual opportunities to deliver financial services to consumers and businesses precisely when they need them.
Some of the world’s most powerful digital platforms are using embedded finance to drive the growth of small and medium-sized businesses (SMBs). These platforms are on the path to seamlessly delivering banking services and are taking on the responsibility of managing banking relationships, as they already play a central role in the lives of SMBs.
For incumbent banks, which have so far mostly outperformed digital players targeting the SMB segment, this presents a new significant competitive threat – and a major growth opportunity if they adopt a similar strategy. Meanwhile, platform players who act early can build substantial new financial services businesses while creating greater value for SMBs.
A new Accenture study, involving around 2,500 SMBs across 10 markets, confirms that these platform players already have massive customer reach and that SMBs are receptive to embedded finance. Accenture’s corresponding model forecasts that revenues from embedded finance could grow to $92 billion by 2025. If banks do nothing, an estimated $32 billion, currently generated from traditional SMB banking services, could be redirected to embedded finance.
Banks have the opportunity to play a role in this evolving sector by reaching SMBs through digital platforms with their existing banking services or by creating new offerings tailored to the platforms’ user bases. Now is the time to decide how to participate in this shift – or risk missing out. There’s a lot to gain, and early movers will have a decisive advantage.
