Embedded finance for SMEs
Leading consultancy firm Accenture recently published its latest Fintech report, entitled “Embedded finance for SMEs: The ultimate collaboration of banks and digital platforms”. The publication focuses on the rise of Open Banking – and therefore Embedded Finance – solutions, and digs into the SMEs world: how can they benefit from these innovative solutions.
As described from the early lines of the report, “embedded finance is about placing banking services in the day-to-day flow of customers’ lives and work.” It is also perceived as the ultimate collaboration of banks and digital platforms.
On the one hand, powerful digital platforms are using embedded finance with the goal to deliver seamless and frictionless banking services to SMEs. They are therefore, in a way, taking ownership of the banking relationship.
On the other hand, the rise of digital platforms/embedded finance marks the arrival of a significant competitive threat for banks and legacy players. As well as a major growth opportunity, provided they adopt a new – and similar – strategy.
More and more SMEs are warming to embedded finance
Accenture’s SME survey suggests that this situation may change fast due to digital platforms’ access to SME customers with the convenience and seamless experience they offer. According to the survey:
- 41% of SMEs would be interested in using banking services from a digital service provider. Interest increases as businesses get larger.
- 44% of SMEs would prefer digital platforms to offer such services in partnership with a traditional bank. Requirement falls as businesses get larger.
- 47% of SMEs would be willing to pay the same or more for embedded finance compared to traditional banks. Willingness to consider a price premium increases with business size.
Integrating banking services into day-to-day workflow
With embedded finance, banking services are starting to disappear into the digital apps, services and interfaces which SMEs use to run their day-to-day business
Accenture
Embedded finance for SMEs consists in enabling financial services without initiating a separate process in another website or app to make, for instance, a bank transfer.
Such services are easy to use and very efficient, and sometimes also offer additional value-added services such as analytics, financial management, etc.
Based on the results of its latest survey, Accenture estimates that embedded finance could capture up to 26% of the global SME banking market by 2025, representing nearly $124 billion in value.
A major trend not to be ignored
“Every bank will soon be forced to decide what its strategy is with regard to embedded finance, and to set about putting this into action.
“Those that lead the change will be able to secure partnerships with prime players in each market and co-create propositions that enable them to not only defend existing share, but also to potentially drive significant growth through accessing new customers and creating innovative propositions,” concludes the report.
Source: Accenture