4 charts on why Americans want to buy financial services directly from their brands

With the emergence of many banking-as-a-service providers in recent years, the infrastructure now exists to enable non-financial brands across many industries to offer their customers access to embedded financial services that could potentially strengthen their relationship with customers.

The value offered by embedded finance rests on the assumption that consumers will choose to obtain financial products from the non-financial brands they use – if the brands choose to offer them. But how true is this assumption?

A recent report by consulting firm Cornerstone Advisors and embedded finance platform Bond finds that most American consumers are indeed interested in buying financial products and services from major brands such as Apple, Gucci, and PlayStation, because they trust these brands and expect to be able to cut costs and save time by reducing their reliance on their bank.

The study asked consumers of various brands about their interest in 15 specific financial products. Some of the highlights include:

• Three-quarters of gamers are interested in an in-game account where they could deposit money, and use it to buy and sell virtual in-game items and collect rewards for game achievements and progress.
• Nearly two-thirds of fashion enthusiasts would consider getting an investment account from a luxury brand that allowed them to invest in that company's stock, crypto, and other assets.
• Over half of DIYers say they’d like to take out a home equity loan directly with their home improvement store, which could translate into $54 billion in loans.
• Two-thirds of home fitness fans – who use apps and devices like Apple Watch, Fitbit and Peloton – expressed interest in health insurance from home fitness providers.
• Six in ten car lovers would investigate auto insurance directly from a car manufacturer, with rates based on their personal driving history and behavior.
• 64% of both Gen Z and Millennials, and 60% of Gen Xers are interested in using an average of 15 different financial products from non-financial brands – with gaming, home fitness, and fashion topping the list.

Source: Cornerstone Advisors/Bond

Among consumers who consider technology and electronics as one of their top three categories, 35% have already obtained some form of financial service from a technology or electronics company. Similarly, one in four have done so from a home improvement brand, and 23% have done so in the gaming category.

Source: Cornerstone Advisors/Bond

The impact of embedded finance goes beyond the revenue generated by the financial product. Around a third of consumers who access financial services directly from brands say that they now spend more money with the brand than they did before, three in ten say they now choose the brand over its competitors more often, and a over a quarter feel more loyal to the brand.

The potential big winners vary by category, but include brands such as Amazon, Apple, Chanel, Chevrolet, Fitbit, Ford, Gucci, The Home Depot, and Walgreens.

Source: Cornerstone Advisors/Bond

Why are so many consumers interested in getting financial products from non-financial brands? The top reasons cited by respondents are that it would cost them less to get financial products this way (81%), they like and trust the brand (61%), and this would make it more convenient for them to use financial products (58%).

Source: Cornerstone Advisors/Bond

On the flip side, among consumers who said they didn’t want financial products from a non-financial brand, nearly eight in ten believed it would be difficult or inconvenient to manage the financial product with the brand, while 77% said they wouldn’t trust getting a financial product from a non-financial brand.

What’s interesting is that only around half of the respondents cited the reason that they prefer to get financial products from their current bank. The more prevalent reason was the concern that it would be inconvenient to manage the product – a concern that could potentially be overcome through improved delivery and execution.

The report’s author – Ron Shevlin, chief research officer at Cornerstone Advisors – argues that the bottom-line result of brands offering financial products is a ‘flywheel effect’: the financial products not only generate revenue, but they lead to consumers showing a greater sense of loyalty and spending more money on the brand’s overall products and services than they did before.

“Traditionally, improving loyalty has been a "cost" for brands – they’ve tried to enhance loyalty by offering discounts for doing more business, or through loyalty programs that cost brands in terms of program administration and lower margins,” Shevlin told Tearsheet. “Embedding financial services generates revenue and improves loyalty – and the more financial services that are provided, the deeper the relationship, and the greater the revenue. The potential for a brand is massive.”

Roy Ng, co-founder and CEO of Bond, adds that in the current macroeconomic environment, it’s more important than ever to build trust and generate spend from your most loyal customers. Credit solutions, in particular, will be increasingly relevant as brands look to generate meaningful returns and drive loyalty by offering embedded financial products to their customers.

“What makes this really significant – especially now that we seem to be heading into a period of great economic uncertainty – is that since consumers appear to trust brands more than banks, they may be more likely to turn to them during this time for financial services and assistance, and that could end up being a game-changer for brands and consumers alike,” said Roy.