For Young Consumers, the Future of Embedded Payments is Now

May 24, 2022


The finance industry has looked at embedded finance as future-trending technology for some time now. However, that future is quickly arriving. 

While some traditional banks and credit unions view this as a threat, others see opportunities to move into the space and work with fintechs to give customers what they want.

Those traditional institutions that are beginning to move from seeing embedded finance as a threat to an opportunity may be the ones seeing long-term success. This is because what was once the future generations that traditional banks and credit unions were waiting for—millennials and Gen Z—are now becoming the primary customer target. And they are increasingly comfortable with utilizing embedded payment methods.


Millennials and Gen Z driving the future of embedded payments

Millennial and Gen Z consumers have grown up in a digital-first world, and when it comes to banking and payments, they are quickly embracing technology-driven methods as well.

While debit cards, cash, and even writing checks are still used frequently by these generations, a Finance Buzz study found that 38% of millennials used mobile wallets when buying everything from gas to groceries. At the same time, only 22% of baby boomers used a mobile wallet to make a purchase.

When it comes to eCommerce and some brick-and-mortar shopping globally, millennial and Gen Z consumers are more likely to use embedded finance tools such as buy now, pay later (BNPL) solutions, according to a study from RFI Global.

Consumers aren’t the only ones looking for digital payment and banking options.

A Pymnts study showed that an estimated 73% of U.S. millennials are now in charge of making buying decisions at their companies, and 74% of millennial B2B buyers have switched to vendors offering more consumer-like payment options for their business customers.


Traditional financial institutions moving toward the digital future

In a recent Info-Pro webinar, “Embedded Finance and Banking as a Service: Threat or Opportunity,” guest speaker Cara Hayward, Director of Commercial Partnerships, North America at Currencycloud, highlighted the impact of younger generations making a move to technology-powered payment methods and finance in general on traditional financial institutions.

“As with the generational shift in consumer expectations, you’re going to start seeing people want to access their financial services through their phones more and more,” said Hayward. “People will still come into branches. That’s not going to die tomorrow. But the generational shift will continue to happen, and that train is already rolling out of the station, so if you can’t beat ’em, join ‘em.”

Hayward also pointed out that as necessary as it may be for traditional financial institutions to become involved with embedded payment technology, what they can offer fintech companies through Banking as a Service (BaaS) is an equally important part of the digital-finance equation.

“Today, there are approximately 75 sponsor banks that I call ‘rent a charter’ that are offering up their charter and their banking services to these fintechs so that they can build on top of them,” she told the online crowd. “It almost tripled in just the past year, so more and more banks and financial institutions are getting into this space. So I think you’re going to see more and more sponsor banks coming out of the woodwork.”

In the end, whether consumer or B2B, customer preferences for digital-payment options are quickly shifting from tomorrow to today.

They’re chasing those better experiences, sometimes leaving financial institutions behind because they are so reliant on older technology and processes,” says Hayward. “That sounds like a very negative view, but that is not the way of the future and that there is an opportunity to change and meet the demand.”

Watch the full webinar to get more insights on taking the future of embedded payments, digital financial services, and BaaS and making it part of your plans today.