Improving the Online Shopping Experience:

Embedded finance is an emerging software distribution model that integrates financial services into existing product ecosystems through partnerships with financial infrastructure providers. The importance and potential of embedded finance cannot be overstated. The management consultant expects the overall market to return to single-digit figure growth, and generate global payments revenue of roughly $2.5 trillion by 2025.[1] And an intelligence report from Business Insider suggests that embedded finance companies will reach a market cap of $7.2 trillion globally by 2030.[2]

Retail and ecommerce platforms currently offer the majority of use cases for embedded finance solutions. The range of buy now, pay later options at online checkouts are one excellent example of the technology being implemented in the retail environment.

Additionally, embedded finance is expected to more extensively expand to insurance, tax, accounting, banking and other services in the foreseeable future. New use cases are already emerging in the fintech and neobanking space, with Galileo, Treasury Prime, Stripe, and Marqeta all being early examples of this technology. The potential for embedded finance is massive, considering that, in 2021, US consumers and businesses spent $7.16 trillion on debit and credit cards collectively.[3]

In order to investigate this burgeoning market and its potential consumers, we recently conducted an extensive survey on several aspects of embedded finance that are known to be of particular significance. The data from this survey feeds into seven key areas that are worthy of examination. It should be noted that consumers from the United States and the United Kingdom were surveyed separately.

Key Takeaways

In this technological age, where we have all become accustomed to purchasing goods with extreme ease, speed of payment can be considered extremely important. Most merchants would conclude that faster payment clearing speeds are an important part of delivering a positive customer experience. Similarly, low payment clearing speeds, errors, and delays in payment processing will typically be intolerable for consumers, and increase the likelihood of shopping cart abandonment.

With this in mind, real-time payments are playing an increasingly important role in the global payments ecosystem, with the number of such transactions soaring by 41% in 2020 alone. This technology is also increasingly important in key emerging markets, with the Asia-Pacific region leading the way in real-time payments - India registered 25.6 billion transactions in 2020.[4]

Our research broadly supported this notion, although the importance of transaction processing speed was considered markedly more important in the UK. Payments speed was reported to be the second most important feature for positive consumer experiences among British participants, with 68% of those surveyed considering it to be either the most important feature of positive experience, or very important in this process.

This figure was lower in the United States, but the majority of those surveyed (53%) still considered fast payment clearing speeds to be important. It is also notable that U.S. respondents were particularly irked when websites failed to update quickly. A webpage not loading on the first attempt was seen as more annoying than any other event in the survey by participants in the United States.

In short, our survey found that faster payment speeds greatly improve the customer experience, while significantly reducing the possibility that consumers will abandon purchases. The faster checkout speeds associated with embedded finance have already proved popular, with a recent study from Temenos discovering that 60% of UK consumers have used embedded finance products during the checkout process in the last 12 months.[5]

There are numerous different types of payment methods available today, and successful merchants must embrace as many of these as possible, particularly as consumers often express explicit preferences when it comes to payment methods. Any embedded payment system will need to embrace traditional payment methods, such as credit cards and bank accounts, alongside more modern competitors, such PayPal, Apple Pay, and even cryptocurrencies.

And the importance of this issue should not be underestimated. When we conducted our survey, respondents in the United States ranked the availability of their preferred payment method as the most important feature related to a positive shopping experience. When considering specific answers about factors that are important in this positive experience, 54% of U.S. respondents reported that the availability of the preferred payment method is either the most important feature, or very important in their purchasing journey.

This was even more marked in the UK. British participants in the survey rated availability of their preferred payment methods as the most important feature by some considerable distance, with over 85% of respondents indicating that this factor is either very important, or the most important feature in any positive shopping experience.

There was also agreement on the negative side of this factor. Roughly half of all respondents from both countries (49%) stated that they would certainly or probably abandon purchases if their preferred payment method was not available. In the UK, the lack of availability of a preferred payment method was listed as the second most negative experience among participants. Younger people also tended to view the availability of the preferred payment method as a bit more important for positive shopping experiences than older people (rho=-.140).

Businesses offering embedded finance features would therefore be advised to ensure that they offer as many payment methods as possible. Embedded payment methods, such as SmartPay Rewards, will also become increasingly important, which will need to be factored in vendor processes.

A report from the Baymard Institute concluded that large-sized e-commerce sites can gain a 35% increase in conversion rate through better checkout design. And one of the simplest ways to achieve this is to ensure that consumers can purchase their goods via a same page checkout system. This has been a particular focus of Amazon, whose '1-Click' patent alone is estimated to be worth billions of dollars.[6]

Previous studies have also indicated that failing to provide a same page checkout feature is one of the primary reasons that consumers abandon purchases. And this is highly significant, as the aforementioned Baymard Institute report concludes that $260 billion of lost orders are recoverable annually solely through a better checkout flow and design.[7]

When we surveyed consumers on this issue, a majority of both U.S. (54%) and British (52%) respondents agreed that having a same page checkout was a very important or critically important issue in their buyer’s journey. It was deemed somewhat more important in the United States, where nearly half (49%) of participants indicated that they would be willing to abandon a purchase if the merchant involved had failed to provide a same page checkout.

While there were other issues in the survey that provoked stronger feelings, it was nonetheless clear that the failure to provide a straightforward and convenient checkout process could be a major bugbear. This is certainly worth considering, not least because it can cost businesses vast amounts of money, over something that is relatively easy to rectify.

Embedded solutions also make it possible to offer a range of personal services, such as instalment payments, utilising loans as a payment method, and insurance offers. These can all be important in delivering a positive customer experience, even though they may not be seen as fundamental as some of the other aspects discussed in this report.

This area of embedded finance was viewed as being considerably more important in the United States than the UK. While British respondents voiced some preference for the availability of instalments, loans, and insurance the figures associated with this were little more than one-quarter of those surveyed. Similarly, less than 20% of respondents in Britain indicated that they would abandon a purchase due to a lack of availability of instalment payments, loans, or insurance.

This contrasted with the United States, where these additional embedded services were seen as a rather more important aspect of purchasing decisions. Indeed, 54% of respondents reported that insurance has been either very important or the most important factor for a positive purchasing experience. Similar figures also applied to instalments and loans, while nearly half of those surveyed indicated that they would abandon shopping if instalments and loan payments were not made available.

It is hard to quantify precisely why there was this contrast in attitudes. But perhaps the much larger geographical area associated with the United States could play some role in the estimation of insurance, as delivery simply becomes more logistically complex. However, it is notable that additional embedded solutions were at least appreciated in both countries, even if they are seen as being very much more worthwhile by U.S. consumers.

We can reasonably expect the prevalence of these figures to grow as embedded payments become a more prominent innovation, and such services can only be delivered via embedded technology.

The provision of personalised offers can be an important part of the customer experience, and can play a role in the sort of contextualised experiences offered by new economic success stories, such as Uber, Netflix, Instagram, and Airbnb. It was therefore valuable to examine consumer attitudes to personalised services, and see to what extent this impacted on what was perceived to be a positive consumer experience.

This was another area in which there was some support for the concept, but the level of support didn't reach the degree of importance applied to other factors. The majority of participants stated that they enjoy personalised offers, but, in the UK in particular, they were only seen as being of low to medium importance. Only 25% of British participants rated personalised offers as being very important, or the most important feature, for a positive consumer experience.

However, there are definitely opportunities for companies in this area, as only 39% of respondents in the United States indicated that they were satisfied with the personalised offers that they receive currently. It was also notable that younger people tended to value personalised offers significantly more than older people (rho=-.194).

Demographics were also particularly important in this area. Respondents from ‘Generation X’ were by far the most satisfied with personal offers, with 43% of this group stating that they were adequate most or all of the time. ‘Millennials’ offered a similar response rate (38%), but this contrasted with older and younger participants. Both ‘Gen-Z’ and ‘Baby Boomer’ participants rated the offers that they received much less favourably, with only 22% of these groups indicating that they were adequate most or all of the time.

Personalised offers can therefore be viewed as icing on the embedded finance cake; not an essential feature, but one that is certainly appreciated, and especially by ‘Generation X’. It seems that personalised offers are currently designed with certain demographics in mind, and that there is potential for other groups to be more effectively targeted.

The term frictionless payments refers to any checkout processes that minimise barriers to purchasing. Examples of this include contactless payments, but frictionless purchases can ultimately be viewed as any process that simplifies authentication. The aim of frictionless payments is simply to ensure that buying products and services is made more convenient.

Frictionless purchases can be extremely important for positive customer experience, and this is critical as online purchasing becomes more complex and regulated. For example, the Know Your Customer (KYC) principle has added an extra level of requirements for many businesses, and these regulations must be dealt with seamlessly, without compromising a fast and frictionless user experience.

Statistics show that reducing customer friction is a $213 billion opportunity for businesses in the United States alone.[8] As technology and expectations evolve, the importance of delivering a smooth purchasing model and experience is increasing in importance.

In accordance with this, our survey discovered that when consumers experience friction during the purchasing process, this is one of the major contributors to negative customer experiences. This is, in fact, highly likely to lead to purchase abandonment.

It is notable that frictionless purchases aren't seen as a hugely significant 'pull factor' – people don't notice frictionless systems when everything works perfectly. But when problems arise, this can be a major annoyance, indicating that this aspect of the checkout process should be a priority, even if its value isn't immediately obvious.

In the UK, being able to checkout without delays is rated as the fourth most important feature for positive shopping experiences. In the United States, a website that requires login was the second highest rated source of negative experience, with almost 50% of respondents reporting that they would likely or certainly abandon shopping if they encountered this. 57% of British respondents also rated checking out without delays as the most important aspect of a positive shopping experience, or being very important in the process.

Creating friction for consumers can therefore cause businesses major problems, and lead to a significant tranche of squandered revenue.

One final area of assessment in our survey was loyalty rewards. Merchants are increasingly willing to pay for commerce-enablement services, such as loyalty programs, gift cards, affiliate marketing, and cashback schemes. Investment in payment performance improvements, such as enhanced authorization rates and chargeback mitigation, have also become ways of delivering improved customer experiences.

Accenture data indicates that 90% of companies in the United States have loyalty programs, collectively representing a staggering 3.3 billion memberships in total.[9] The attraction of attaining customer loyalty is obvious - $1.6 trillion is lost annually by businesses when their customers decide to switch to competitors, while the chances of selling to a new customer are reckoned to about 5-20%, compared to 60-70% with existing customers.[10]

However, it is important to note that while customers have been loyal to certain outlets and financial institutions over time, this tendency is evolving in the modern diverse climate. Customers are far more likely to shop around, or abandon favoured stores and providers for competitors. There may be billions of loyalty memberships, but Bond data shows that only around 45% of them are actively utilised.[11]

This means that loyalty programs can play a significant role in not only delivering a positive consumer experience, but also in retaining customers over an extended period of time. However, the prevalence of loyalty programs means that they can be taken for granted, or else companies need to offer something outstanding in order to really obtain customer loyalty.

In accordance with this, our survey generally found that loyalty rewards are associated with positive customer experiences. But their absence is not really regarded as a particular negative. This was consistent across respondents from both the United States and the UK.

In Britain, loyalty reward programmes were only rated as being of moderate importance for a positive shopping experience. Only 29% of respondents considered it either the most important factor, or very important in their overall shopping experience. This differs somewhat with the United States, with participants in the survey based in the US considering loyalty rewards to be the third most important feature of a positive shopping experience.

However, there was stronger correlation on whether or not the existence of a loyalty programme was a significant negative. Relatively few consumers from either the United States or the UK would abandon a purchase due to the absence of a loyalty programme.

Nonetheless, this is clearly another area where businesses can set themselves aside from the competition by offering attractive rewards, and, in the process, achieving loyalty among consumers. And it should be emphasised that embedded finance is the ideal solution to deliver this functionality.

Although embedded finance has become somewhat established, there is still considerable room for maturation in this market. Indeed, estimates indicate that it is entirely feasible for companies to become new entrants to embedded finance, as the market is expected to double in size over the next three to five years.[12]

It is therefore valuable to gain an insight into the preferences of customers in this sphere. Our research found that supporting faster payments, a variety of payment methods, efficient checkout experience, personalised offers, loyalty rewards, frictionless payments, and additional embedded solutions were all worthwhile, and all valued by consumers, albeit to differing degrees.

We can reasonably conclude that the availability of the preferred payment method is reported as the most important factor with regard to positive experiences, while failing to deliver fast and efficient payment experiences was a major negative for consumers in both Britain and the United States. When customers experience friction in their purchasing journey, this tends to really grate with them, and probably costs companies in this sector more sales than any other factor.

Factors related to the personalisation of offers of experiences were viewed as less important than these more fundamental factors, but still valuable. Consumers do not mind if they are not offered loyalty rewards or personalised offers, but they tend to value this significantly when they are offered. These aspects of the customer experience should therefore be viewed as valuable ways that companies can offer unique value propositions, and differentiate themselves from competitors. Businesses trading in the United States should also note that the availability of insurance was rated as one of the most important factors for positive experience among U.S respondents.

The future of embedded finance looks bright, due to a variety of factors, including the growing technological revolution, the diversification of several economic sectors, and the growing footprint of tech firms in finance. It’s also important to note that even though regulation related to this sector is becoming more complex, the rapid pace of technological development means that it’s still possible to offer amazing experiences to consumers.

This is also a sector that is growing across numerous geographical locations. Companies intending to cash in on this growing market would be recommended to pay heed to our research, which indicates that there are several critical factors that dictate whether or not your adopted EmFi services appeal to consumers, and whether they have a positive impact on your profit margin.

DECTA is a global payment processing company, experts in FinTech. Company provides a complete range of digital payment services designed with the needs of Merchants, Banks, and Payment Service Providers in mind. Used by 2000+ companies across 32 countries, solutions include: Payment Acquiring Services, BIN Sponsorship and White Label Card Issuing, White label Payment Gateway, Issuer and Acquirer Processing.

DECTA surveyed British online shoppers aged 19-68 and US shoppers aged 23-68 years totalling 1504 respondents. The survey was run using Amazon Mechanical Turk in period from 22.November to 1.December of 2022.

1. McKinsey & Company. (2021). The 2021 McKinsey Global Payments Report.

2. Samet, A. (2022). The Embedded Finance Explainer: Nonfinancial companies are increasingly looking to offer financial products via their platforms—here's how innovative FIs can partner with them to capture a $7 trillion opportunity. Business Insider.

3. Harris, M., et al. (2022). Embedded Finance: What It Takes to Prosper in the New Value Chain. Bain.

4. Samet, A. (2022). The Embedded Finance Explainer: Nonfinancial companies are increasingly looking to offer financial products via their platforms—here's how innovative FIs can partner with them to capture a $7 trillion opportunity. Business Insider.

5. Temenos. (2022). Embedded Finance in the UK: An Opinium Survey for Temenos.

6. Shirley, A. (2017). Amazon One-Click Patent Worth Billions Expiring in 2017. QeRetail.

7. Baymard Institute. (2022). 48 Cart Abandonment Rate Statistics 2022.

8. ibid.

9. Morgan, B. (2022). 50 Stats That Show The Importance Of Good Loyalty Programs, Even During A Crisis. Forbes.

10. Miller, G. (2022). 32 Loyalty Program Statistics That Will Make You Rethink Marketing. Annex Cloud.

11. Bond. (2019). The Loyalty Report.

12. Dresner, A., et al. (2022). Embedded finance: Who will lead the next payments revolution?. McKinsey & Company.

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