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Data Snack: SMBs want more embedded banking options

  • The global market for embedded financial services for SMBs is forecasted to be worth $124 billion by 2025.
  • 85% of SMBs were surveyed to be using embedded digital services in their day-to-day operations.
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Data Snack: SMBs want more embedded banking options

SMBs around the world have developed a liking for embedded finance offerings, a recent Accenture survey found. While the shift had been gradually building over the past few years, pandemic-era development accelerated adoption. The report forecasts that the market for global embedded financial services for SMBs will be worth $124 billion by 2025.

Accenture surveyed senior managers from over 2500 SMBs across 10 countries, including the US, UK, Australia, and Singapore. The consultancy found that SMBs are interested and willing to pay for embedded finance solutions. 

Here are some stats:

  • 85% of SMBs said they use embedded digital services in their day-to-day operations
  • 41% of SMBs said they would be interested in using embedded banking services provided by digital service providers
  • 44% said they would prefer digital platforms that offer such services in collaboration with traditional banks. This choice was most popular among micro (1-9 employees) and small-sized (10-49 employees) businesses
  • 47% said they would be willing to pay the same or more for embedded finance offerings than they do for traditional banking offerings

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The report predicts that by 2025, 26% of the global SMB banking market will be claimed by embedded finance. This should alarm traditional banks, which are slow in adopting newer technology. With platform-based digital financial services having already proven their proficiency in serving the SMB market, embedded offerings have the potential to walk out as the big winners.

The survey found that SMBs are not particularly interested in long-term financial services, like loans. They are more interested in services that help them work out cash flow. So, the threat that incumbent banks face is not necessarily one of losing primary accounts. They face the risk of losing their clients’ share of pocket, as more and more adopt digital alternatives for their day-to-day operations.

The survey also found that 41% of the respondents were interested in additional banking services offered by a digital service provider. Credit and debit card offerings are among the most popular, with 64% and 50% of SMBs showing interest, respectively. The report also showed significant demand for digital checking accounts (60%) and savings accounts (46%). Other offerings in demand are insurance (42%), loans (34%), and overdraft (30%).

The report suggests that as digital platforms adopt embedded financial services, two prominent models will appear: the first, a pass-through system; and second, a platform-branded system. Pass-through systems comprise platforms that are interface-based and white-label, operating as gateways to third-party banking services, provided via APIs. The platform-branded system comprises platforms that have their own technology, and the developing company operates under its own name. Platforms may not perfectly fall in either of the categories and may adopt a more hybrid model. Under this model, they may co-brand their services, or become exclusive distributors for a certain brick-and-mortar bank or fintech service.

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