61% of Firms Put Payroll Benefits Next in the Embedded Finance Queue

Embedded finance appears to have crossed a revealing threshold: Companies are treating its growing pains as reasons to improve the technology rather than abandon it.

The PYMNTS Intelligence report “Embedded Finance as a Strategic Initiative” found in October that 93% of companies encounter friction with the financial tools built into their customer or employee platforms. Yet 93% are highly satisfied with those capabilities, and 94% plan to increase investment over the next three years.

The report drew on a survey of 515 senior leaders at companies in the United States. Nearly every company offers at least one embedded finance feature, while 93% offer three or more.

Key findings:

• Customer relationships lead the agenda, as 45% of companies cited stronger customer and employee relationships as a reason to offer embedded finance, making it the top motivation. Improved user experience followed at 38%, while brand differentiation came in at 35%. The findings suggest companies see payments, banking and money movement inside their platforms as tools for building loyalty as well as generating revenue.
• Growth hasn’t erased the rough edges. Platform transparency and flexibility created problems for 42% of respondents. Technical integration followed at 40%, compliance and security at 39%, and strategic alignment and return on investment at 38%. Overall, 90% encountered at least two sources of friction. Embedded finance now resembles a busy highway. Traffic is heavy, and companies are investing in smoother on-ramps.
• Upgrades are moving onto near-term calendars, as 37% of companies plan improvements within six months, and 39% expect to act within six to 12 months. Among companies that already provide embedded banking, 80% plan enhancements. The comparable figure for embedded payments is 72%. Payroll benefits lead the wish list for new features, with 61% of companies that don’t offer them planning to add them.

Outside providers will play a large role in that expansion. The report revealed that 69% of companies use at least one third party, while 31% keep all capabilities in-house. Trust and alignment with business goals influence partner selection for 88% of respondents. Technology and customization follow at 76%, ahead of security and compliance at 63%. Value and pricing rank lower at 41%.

Companies also judge the technology more by growth than savings. According to the report, 86% use financial performance as a success measure, 75% track customer growth and 33% cite cost efficiency.

Together, the findings point to a more mature market. Companies have identified the obstacles, but most believe better technology and stronger partners can help turn broad adoption into better customer experiences and financial results.

At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.

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