New research released by Mastercard confirms consumers in the Asia Pacific region are among the most enthusiastic adopters of digital payments in the world. In fact, the same research reveals 88 per cent of consumers in the region have used technologies like Buy Now Pay Later (BNPL) in the last year.
Such new payment habits are creating a new era of opportunity in embedded finance for retailers and brand manufacturers alike. Why? Brands have the upper hand in engaging consumers by leveraging the trust they have to expand their offering with adjacent and complementary services that have low friction to the customer journey.
Despite the flooded market of buy-now-pay-later (BNPL) services, embedded finance in the retail sector has barely scratched the surface of this new revenue stream’s potential. Forecasts from Juniper Research estimate the value of the global embedded finance market will exceed $138 billion in 2026. The same forecast estimates revenue from BNPL services will account for just over 50 per cent of the embedded finance market in 2026 – confirming there are new channels that remain untapped.
Like banks, which are now exploring identity-as-a-service offerings to drive new revenue streams, retailers and brand manufacturers must ‘think outside the box’ when it comes to capitalising on the opportunities and innovations in the digital realm. This is because, unlike banks, retailers can deploy innovative banking as a service (BaaS) offerings that bypass complex regulation exercises, allowing them to capitalise and respond to emerging innovations and trends.
This advantage, paired with the leverage of having a conveniently captured audience, allows retailers to continue to build a seamless experience and offer a suite of products and services for customers to enjoy. Savvy, large-scale Australian retail groups are already taking notice, spurring competition to be at the forefront of the embedded finance movement, with credit cards, insurance and even superannuation offerings now on the table for customers to access.
But it’s not just large-scale retailers and brand manufacturers that get to reap the rewards of what embedded finance offers. The pace at which BaaS offerings have innovated means the banking value chain has been reconfigured to offer a world of opportunity for retailers to enhance experiences that are unique to satisfy their customers’ wants and needs. It also means that embedded finance offerings, which were previously a customised multi-million dollar investment for retailers, are now largely accessible and financially viable for smaller, niche retailers to adopt.
However, to capitalise on the golden opportunity of embedded finance and win big, retailers and brand manufacturers need to think beyond just convenience. Controlling the brand experience is becoming increasingly important to stand out from the competition and secure the attention of consumers within digital platforms. To this end, before jumping into the sea of BaaS applications, retailers must consider the purpose that each embedded finance offering serves and ensure it has utility. This requires a thorough understanding of the customer in question.
Mobiquity’s new global benchmark report, How to win big in a competitive D2C market, revealed almost three-quarters (73 per cent) of global brand manufacturers are blindly missing an opportunity to get to know their customers better through loyalty programs. This may not seem like a big deal at a glimpse, but what brands must understand is that loyalty programs offer rich insights that can help make inroads into new products and services, such as the way in which customers choose to pay or the financial services they require.
Loyalty programs should either initiate, compliment or fulfil the customer’s purchase decision – essentially acting as a system of currency. The key here is to ensure that loyalty programs should not stand alone within a business, but rather be an integrated part of operations to drive new revenue streams such as those embedded finance offers.
Brands that do not invest in understanding their customer will miss out on the embedded finance movement. This is because a blanket approach to engaging with customers does not build trust, personalisation does. Embedded finance offerings still remain at the customer’s discretion to leverage and, understandably when it comes to financing, trust is paramount.
If brands are to truly win big in a competitive market they must understand the onus to deliver frictionless customer experiences rests with them. Only when brands accept responsibility for activating tools to capture rich customer insights will they discover the products and services – such as those in embedded finance – that customers yearn for.
About the author: Gustavo Quiroga is the Asia-Pacific GM at Mobiquity, a full-service digital transformation enabler.
