According to a new study commissioned by Green Dot (NYSE: GDOT) and conducted by PYMNTS.com, 94% of enterprises plan to increase their investments in embedded finance, with three out of four planning to increase investments in the next 12 months. Companies are focused on enhancing banking (80%) and payments (72%) capabilities, as well as adding new payroll (61%) and investing (57%) in tools and features. The findings are featured in Embedded Finance as a Strategic Initiative.
“The data is clear: Embedded finance is no longer a niche offering limited to businesses of a certain size or vertical; it has become a strategic priority across a wide array of industries and offers value to companies at almost every stage of growth,” said Renata Caine, senior vice president and general manager of banking as a service at Green Dot. “Meanwhile, the complexities and risks that are inherent in embedded finance are continually evolving and must be carefully considered and managed. Alignment and trust between BaaS providers, partners and customers are increasingly critical, if not non-negotiable.”
Embedded finance is everywhere – and growing
Nearly 94% of companies plan to increase their embedded finance investments, with growth expected across all industries surveyed and with 76% expecting to upgrade capabilities within the next 12 months. Banking and payments lead current adoption, with seven in 10 companies embedding these features. Among planned enhancements, companies are prioritizing upgrades to banking (80%) and payments (72%) capabilities, while focusing new additions on payroll (61%) and investing (57%) capabilities.
Why companies embed finance: Customers over cost
Companies are embedding finance primarily to strengthen relationships with customers and employees (45%), improve the user experience (38%), and enhance and differentiate their brands (35%). When planning investments, they’re prioritizing success metrics beyond cost efficiencies (33%), focusing instead on improving financial outcomes (86%) and driving growth through stronger customer relationships (75%).
Risks are real, but the payoff outweighs the pain
While 93% of companies report risks – led by transparency and flexibility concerns (42%), technical and integration challenges (40%), and compliance and security issues (39%) – these concerns are not slowing adoption. In fact, 93% of respondents said they are very or extremely satisfied with their embedded finance capabilities.
Meanwhile, regulation seems to be less of a concern, with 39% of respondents believing it may negatively impact the industry, compared to 57% who believe increased regulation will have no negative impact on embedded finance and its end users. Fintechs were the least concerned, with 62% indicating growing regulatory oversight would have minimal negative impact.
For partnerships, trust and alignment matter
Nearly 70% of companies outsource embedded finance delivery. When selecting a partner, trust and alignment (88%) are cited as the most critical factors, followed by technology compatibility and customization (76%). Security and compliance (63%) and delivery and execution (57%) also play key roles, outweighing pricing considerations (41%).
“It’s encouraging to see investments in embedded finance continue to increase and expand as leaders across industries recognize its power to drive deeper engagement, deliver value and unlock new opportunities for their businesses and customers,” Caine continued. “We are excited about the future of this space and the endless possibilities our Arc platform offers to grow with our partners and support our shared visions and goals.”