PSE Consulting and TSG have published new research tracking the current levels of adoption of Embedded Finance in Europe and the US. Europe’s banks, financial institutions, and financial players are currently lagging behind those in the region of the US in the Embedded Finance market, according to research made by payment consultancies PSE Consulting and TSG (The Strawhecker Group).

The study reveals that 33% of SMBs in the US already leverage Embedded Finance solutions through the use of a Software-as-a-Service (SaaS) platform, compared to just 11% in the UK and 6% in Germany and France. More insights on the research Embedded Finance is currently expected to optimise the manner in which financial services are delivered in the market, as more use cases are explored across a wide range of industry verticals. According to the official press release, the research finds that one of the big adoption hurdles is not really a lack of demand from SMEs, but that the market has been constrained because of SaaS platforms that have struggled to promote Embedded Finance and capture the overall interest of merchants.

The research surveyed 1.000 SMBs across the regions of the US, the UK, France, Germany, Italy, and Spain, and it showed a significant gap in the use of Embedded finance in the US compared to Europe. Although the interest in both regions is very similar, with 51% of UK SMBs taking Embedded Finance services when offered (compared with 53% in the US), what drives the difference in the maturity of the market is the software platforms’ success in promoting the product. Only 22% of UK merchants and 16% of Italian businesses mentioned they have received an Embedded Finance offer from their SaaS supplier, compared to over 60% in the US.

At the same time, merchants have provided a clear signal that they are interested in switching to a software platform away from the traditional payment providers. 70% of SMEs across the regions of Europe and the US also said they would use a software platform’s payment service when they next change suppliers, with a gap between US interest levels which now exceed 80%, and the 55% in Europe. The study also explored the current and anticipated demand for the full range of embedded products.

Payment acceptance emerges as the most mature tool (with 15% of US merchants currently leveraging this service), while products such as insurance and FX remain nascent. The potential of embedded lending is also apparent, with 69% of US businesses being interested in taking finance from their software suppliers. However, this solution is much less mature than payment acceptance, with only 3% of US merchants currently utilising their software suppliers to source their lending.

For banks in particular, embedded lending is a ready-made niche where they will have the possibility to leverage their brand trust and customer loyalty in order to offer capital through new channels. In addition, by accelerating the adoption of embedded lending, banks will be enabled to connect with new customer bases and markets as well. Source: Link .