Four in ten UK SME businesses (38%) plan to use embedded financial service products more in the next 12 months. Research from Temenos reveals that embedded finance is the fastest growing trend in the fintech industry.

Embedded finance, the integration of financial services such as payments, lending, or collections, into non-financial platforms or applications.

Platforms operating these products range from online retailers to customer loyalty apps, accounting software and transport providers. Advocates of embedded finance argue that it brings convenience, speed and economy to consumers and businesses across services used daily.

The Temenos research reveals that of the 43% of SMEs that have used at least one embedded financial service in the last 12 months, improved customer service is the biggest benefit (cited by 40%). This is followed by improved cash flow (38%), getting paid faster and increased sales (both 34%).

Embedded finance: younger SME decision makers more likely to adopt

SMEs also claim to benefit from embedded finance products through more efficient internal operations (31%). Other benefits include a reduced amount of money spent on bank fees (27%); faster customer onboarding (25%); and time saved on financial admin (24%).

The study reveals that younger SME decision-makers are much more likely to be using embedded finance products. Some 78% of respondents aged 18-34 have done so in the past year. This compares to 46% of those aged 35-54 and just 16% of those aged 55 or over. Similarly, two-thirds (65%) of those aged 18-34 plan to use them more in the next 12 months. This compares to 42% of those aged 35-54 and just one in five (19%) of those aged 55 or over.

Embedded finance: redefining how customers use financial services

Jon Davies, Research Director, TechMarketView, said: “Embedded finance is redefining how customers use financial services. This is just as true for SMEs as it is for consumers, who increasingly don’t interact directly with a bank for many of the financial services they use day-to-day. The end user may not be aware of it. But the bank can still be capturing a lot of the value of these services in the background. To stay relevant, banks are investing in modern technology platforms that enable them to adapt and take advantage of the new business models and market opportunities.”