In my previous article, I examined the motivations for corporates to introduce embedded financial services. It revealed a clear ‘why’ centred on enhancing the customer experience and driving significant new revenue. 

But how will they implement them? Have they encountered any obstacles to making their vision a reality? 

We recently conducted in-depth research with 200 senior decision-makers at leading corporates, to capture the strategies and priorities of organisations with the scale to shape the market. 

In this article, I’ll examine what senior leaders view as the ideal model for implementing embedded services, any barriers they perceive and where they believe embedded finance is heading. 

It’s apparent that respondents are keen to implement embedded finance, particularly payments, and they see numerous benefits for their business and the customers they serve.  

However, these firms were not built or scaled to offer financial services, creating barriers to entry, as reflected in the fact that 75% of senior leaders said they would offer embedded finance if it were easy to implement. When examining these concerns in closer detail, 61% stated the most significant barrier is technical integration, indicating that many organisations struggle with the complexity of integrating embedded finance solutions into their existing systems.  

These issues are likely compounded by architectural constraints that translate directly into business limitations. Launching financial services can require extensive development cycles and substantial risk management, which may also explain why 43.5% of senior management cited the lack of internal expertise (43.5%) and the cost of implementation (34.5%) as concerns. 

It can also be a cultural issue, as a Director at a UK energy company explained:

However, these concerns also underscore the need for a thorough partner selection process to fill those gaps in expertise, as seen in the 32.5% of senior leaders ranking finding the right partner as a barrier. 

When examining the qualities firms look for in an embedded finance partner, technology capability (68.5%), industry expertise (53%), and regulatory support (52.5%) were the top priorities. This is unsurprising when compared to earlier results, which revealed concerns about technical integration, internal skill gaps, and compliance capabilities. 

The integration of financial services into non-financial platforms requires sophisticated technology and infrastructure. Our research found that many implementing, or planning to implement, these services are partnering with a fintech or Banking as a Service (BaaS) provider (39.5%), third-party platforms (29.5%) or with a bank (16%).  

Surprisingly, only 1.5% would partner with a consulting firm, indicating they want a direct relationship with their embedded finance partner. This result could also be a byproduct of more sophisticated embedded finance providers coming to market.  

It also suggests that incumbent banks have been slow to appreciate the opportunities that embedded finance offers. This can be seen in the sluggish response to the growth of BNPL platforms and the dearth of embedded services they offer. 

A Strategy Lead at a consumer goods firm outlined the issues they have faced partnering with an incumbent bank, stating:

That view was reiterated by a Director at UK technology platform: “Credibility is important, and we partner with a bank. However, that comes with multiple challenges, because they work on their own timelines, so it's a little tricky.”  

Embedding services at the point of need, particularly into non-financial applications, makes trust in the underlying provider paramount. Customers may accept financial services that are embedded in their everyday lives, but, as this research reveals, brands recognise the need to responsibly and transparently manage customers’ data and deposits. 

That requires finding embedded finance partners with the right customer, technical, operational, and regulatory excellence to deliver trust in their services. 

When asked how confident they were in brands’ ability to launch compliant financial services at scale, the vast majority (81%) were very confident (15%) or somewhat confident (66%). However, 15% were not confident. This suggests that BaaS platforms and banks have work to do in reassuring embedded finance prospects about their abilities to support customer onboarding and transaction oversight. 

Unsurprisingly, a high percentage (63%) of respondents are concerned about brand damage if services fail, as well as the subsequent loss of customer trust (51%), highlighting the critical importance of reliability and trust in financial services. It further emphasises the need for robust and reliable embedded finance solutions to maintain customer trust and brand reputation. 

For example, a Strategy Lead at a Technology firm explained it had partnered with a bank for that reason: 

Finding a trusted partner who can provide the quality of service you require and meet your customers’ expectations is critical. But what should you look for in a potential partner for embedded finance? 

I’ve outlined some for embedded accounts in this blog post. 

One critical aspect to consider is that many ‘bank-like’ services can offer accounts and digital wallets to store funds due to the significant growth in the number and use of electronic money institutions (EMIs) and BaaS platforms.  

However, this requires a thorough examination of where they hold customer funds as they use an underlying partner bank, the protections in place, and who, if anyone, offers deposit protection such as the Financial Services Compensation Scheme (FSCS). 

Historically, firms seeking to deliver embedded experiences have faced a compromise – work with a BaaS provider that offers technical innovation and agility, or an incumbent that has proven governance and control frameworks, processes and oversight but may lack the real-time APIs they need. 

As a Director at a UK technology platform explained: “It needs to be a reliable, trusted partner. But we also found the options were either fully established but not flexible at all, or they weren't particularly established but hugely flexible.” 

That has changed in the last five years as more banks have embraced the opportunity to embed their services into the experiences of third-party firms. ClearBank has been at the forefront of that trend. 

ClearBank offers the Banking as a Service (BaaS) model through its embedded banking solution. 

While BaaS has provided the foundational infrastructure for modern financial services delivery, embedded banking represents a more sophisticated implementation of the model. This includes embedded current and embedded savings accounts, as well as embedded payments. 

Embedded services delivered by an authorised bank can offer all the benefits of BaaS, complemented by the processes and controls expected by its regulatory status. By building on top of a regulated bank’s proven infrastructure, a firm can deliver compliant services and the associated features, such as protection on eligible deposits, without incurring the substantial cost of applying for a bank licence. 

For example, ClearBank enables its clients to manage the customer-facing aspects, allowing them to oversee and interact with their customer base in a manner consistent with their existing user experience and brand. However, each client must adhere to our minimum standards and cooperate with the bank’s oversight requirements. These standards ensure that the robust governance and ownership expected of a bank are combined with the agility of launching new services in the BaaS model. 

ClearBank is also proven to deliver significant return on investment (ROI) to our embedded banking partners. This was shown by leading consultancy firm Forrester and its Total Economic Impact (TEI) model, which considered the various factors that contribute to an ROI. You can read its in-depth assessment here.