Financial news

Embedded finance is here to stay reveals a Weavr whitepaper. According to the white paper, 79 per cent of UK banking executives hear the term at least once a week if not more. Weavr’s whitepaper delves into this subsector of the fintech world to understand the industry’s response to it.

The full Weavr whitepaper, inclusive of the survey results, offers insights into the nuances influencing the approach to embedded finance innovation across UK banks and financial institutions. Carried out in collaboration with Censuswide during May 2023, Weavr surveyed responses to embedded finance.

Despite a lack of clarity on how to approach the tech, the majority of respondents revealed they are keen on the technology with 63 per cent considering it to be a significant growth opportunity for banks. Furthermore, 65 per cent of UK banking and financial executives stated their business was already active in research and development.

In light of this, several banks have sought partnerships with embedded finance technology providers. Their aim is to find help through proven solutions that can scale with the support of the banks’ capabilities and balance sheets. Weavr’s launch in June of the Embedded Finance Cloud, its proprietary technology stack to enable banks to create and distribute financial products that are ’embeddable by design’, is an example of this trend.

Not everyone is sold

Despite the majority of respondents showing interest in the tech, others showed reservations towards the technology. According to the whitepaper, four out of five (80 per cent) of UK banking and finance executives consider ’embedded finance’ to mean something different to ‘banking-as-a-service‘. This is only one way the technology has created uncertainty.

Another way was through compliance. Over two-thirds of respondents identified 10 risks and costs associated with developing the technology. As a result of this, Weavr identifies that organisations may be more internally focused on R&D, and not leverage external expertise. This is especially true following the recent implementation of the Financial Conduct Authority‘s (FCA) Consumer Duty regulations.

Analysis in the Weavr whitepaper infers that banks may find themselves constructing fragmented, small-scale embedded finance systems. As a result, they will miss out on the potential speed to market and scalability promised by a partnership approach.

Overall, the whitepaper reveals that 99 per cent of respondents showed how some questions surrounding embedded finance were holding them back.

The technology cannot be ignored

Weavr’s CEO and co-founder, Alex Mifsud, reflecting on the whitepaper, stated: “What stood out most from the research was that 79 per cent of execs in financial services firms in the UK are discussing embedded finance at least once per week. Given the broad audience surveyed, that is a truly extraordinary and surprising figure.

“The biggest single conclusion is that no financial services firm can ignore the exciting new distribution channel that is embedded finance. Furthermore, as our research demonstrates, more and more banking professionals are recognising that embedded finance innovation is not the same as open banking and cannot be expected to succeed if narrowly interpreted as a derivative of past efforts to develop premium APIs.

He added: “Offerings like the embedded finance cloud equip banks and e-money establishments with the tools to build financial products that are designed for embedding. This is key as risk and compliance are integral. By embracing solutions that afford maximum control and safety, financial bodies can swiftly and safely tap into new revenue channels.”