Embedded finance solutions, including BNPL and flexible payments, are on the rise in the UK as consumers face the impact of a rising cost of living.

It is becoming more and more obvious that consumers are keeping a lot tighter eye on their money as a rising cost of living continues to have an impact on people around the UK. According to recent study from Vodeno and Aion Bank, embedded finance usage is fast rising in the middle of this difficult environment.

Because of the high cost of living, 37% of users are more inclined to look for companies that offer embedded banking products like BNPL and flexible payment alternatives, according to European Banking-as-a-Service (BaaS) provider Vodeno. For users aged 25 to 34, this percentage rises to 50%.

For 44% of consumers, affordable pricing are the most crucial aspect that influences their brand loyalty, closely followed by a good product range (43%).

The findings show that customer loyalty is beginning to be impacted by the availability of embedded banking products on consumer brand websites and mobile apps. In general, 40% of customers think they will only remain loyal to firms that provide financial perks like BNPL and cashback; this percentage rises to 50% among consumers aged 25 to 34.

In terms of loyalty program participation, 46% of consumers are more inclined to utilize a brand’s loyalty card to make purchases if it supports BNPL. This percentage was highest among the youngest consumers polled, rising to 53% for those between the ages of 16 and 24, and even higher (65%) for those between the ages of 25 and 34.

Overall, the new Vodeno/Aion Bank study shows that the adoption of embedded banking is currently having a big impact on brand loyalty. Due to the cost-of-living crisis, consumers seem to be much more willing to use embedded financial services from brands, which is advantageous for any company providing these services to customers.

“Consumer competition has never been more intense”

The influence of embedded finance may even extend beyond consumer brand loyalty, as research shows that customers who have used an embedded financial product from a brand are more likely to use their app or website again.

When asked how often they purchase with their favorite companies, 19% of all respondents replied “monthly,” while 16% said “once every two to three weeks.”

However, 36% of those who have used integrated banking products stated they return to the brands between three and five times a month; this number increased to 43% for those between the ages of 25 and 34.

We cannot disregard the advantages of embedded banking, according to Kim Van Esbroeck, country head for Aion Bank Belgium and chief revenue officer for both Vodeno and Aion. Our study provides compelling evidence that customers are using these solutions and that doing so is having a positive impact on their brand loyalty to BaaS-enabled companies.

“Consumer competition has never been fiercer, especially in these challenging economic times. Brands that offer flexible payment and loan alternatives give more choice, which can increase consumers‘ purchasing power when they most need it.

“Embedded banking is also having an effect on brand loyalty, with 43% of consumers between the ages of 25 and 34 reporting increased brand loyalty. Banking with BaaS support is already helping innovate customer experiences, so brand loyalty programs will be next.

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