For millennials and Gen Z, the lines between where they choose to shop and ‘bank’ are blurring, thanks to Banking-as-a-Service (BaaS). Today, brands that consumers use every day are able to offer banking products directly in their customer journey, and adoption of these embedded banking services is increasing exponentially, especially amongst millennials and Gen Z. Powered by BaaS, the customer journey is becoming easier, faster and more convenient, and brands that are adopting BaaS solutions are seeing direct benefits to customer loyalty and engagement.
Vodeno/Aion Bank recently commissioned an independent survey of more than 3,000 European consumers from the UK, Belgium, and Germany. It revealed that over half (52%) of 25-34-year-olds prefer using financial products and services from their favourite brands over traditional banks.
A similar number (51%) of respondents in that age group said they believe that brands are making banking more accessible, while 52% think brands offer financial products better tailored to their specific needs compared to traditional institutions.
The research underlines that banks no longer hold a monopoly over consumers when it comes to financial products, and brands offering embedded banking are driving this trend. As more companies adopt BaaS and more use cases across more sectors become available, the value of the global BaaS market is predicted to more than double in the next five years, rising from $4.2bn in 2023 to $11.6bn by 2028.
Speed, convenience and a seamless customer journey
Why would consumers choose a financial product from a brand rather than a bank? Brands have pre-existing and trusted relationships with consumers, and those relationships are extended when financial services are introduced. Ultimately, embedded banking products must make sense in the customer journey and offer real value to the customers in order to be embraced.
Indeed, the study underscored that convenience is a significant factor driving this shift in consumer behaviour: 25% of respondents aged 25-34 stated that convenience is the primary reason they go to their favourite brands for banking, rising to 45% among those aged 35-44.
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Furthermore, 35% of respondents in the 25-34 age group have used embedded banking products because the brand offered them attractive rates. While ease of use is an important element of convenience, adding tangible value is also impactful – this has become ever more important given the cost-of-living pressures consumers face around the globe.
Buy Now, Pay Later (BNPL) is a prime example of how consumers are benefitting from embedded banking. BNPL provides shoppers with greater flexibility and choice, and as a result, usage of the product is growing, with shoppers in the US spending more than $7.3bn – an increase of 17% from the previous year.
Our research showed that more than a third (37%) of European consumers said they prefer brands that offer flexible payment options like BNPL and, tellingly, the figure rises to 44% among those aged 18-24 and to 54% for those aged 25-34.
Embracing new opportunities
BaaS is ushering in an exciting financial revolution, and it is becoming increasingly clear that Millennials and Gen Z consumers are at the forefront of this change.
Looking to 2024, we will undoubtedly see more brands across almost every consumer segment embrace embedded banking.
For brands considering BaaS, finding the right partner is critical. Building and deploying BaaS products are just one step, understanding the needs of the customer, choosing the right products to prioritise and creating a strategy to communicate and engage their user base are equally important.
This is why Vodeno/Aion, offers full end-to-end BaaS, with a consultative approach, bringing together the necessary tech, a full ECB banking licence that underpins a comprehensive range of embedded solutions, and the regulatory and compliance expertise of a fully licenced European bank.
The key for brands is to choose the right products and offer them in the right areas of their shopping journey, and the benefit to businesses who do embedded banking right is increased conversion, repeat visits and a deeper relationship with their customer.
Kim Van Esbroeck is Chief Revenue Officer, Vodeno