Non-financial services companies will process roughly $7 trillion worth of transactions through integrated finance in the US by 2026, according to research.
This doubling in the value of transactions made using platform-integrated financial services was revealed in a research report by Bain & Company and Bain Capital, reflecting research in Europe by banking-as-a-service (BaaS) provider Vodeno.
In a survey of more than 750 European retailers and e-commerce companies, Vodeno found that 64% planned to adopt technology that would allow them to integrate financial products into their services.
Non-bank businesses, such as retailers, e-commerce companies, and distributors, are increasingly looking to offer financial products to their customers. This could be credit cards, loans, or even debit cards.
According to Bain’s report, payments and lending will remain the largest integrated financial services, but added that adoption of “adjacent value-added services, including insurance, tax and accounting,” will also increase.
The report said that traditional financial service providers faced significant challenges stemming from integrated finance.
“The rapid acceleration in the use of integrated finance and its transition to the financial mainstream is gaining momentum as its proposition improves customer experience and financial access, along with cost and risk reduction benefits, for companies throughout the value chain,” the report said.
He also said there would be a market worth $51 billion by 2026 for software providers that enable integrated finance, often referred to as banking-as-a-service providers.
Adam Davis, associate partner in Bain & Company’s fintech practice, said, “Integrated finance has quietly become an important part of how consumers and businesses make payments and access finance.”
He added that integrated finance removes friction from the sector and makes financial services more contextual, accessible and useful.
Jeff Tijsen, global head of fintech at Bain & Company, added: “For businesses, this change is a huge opportunity. There will be no shortage of funding for the growth of the sector as platforms experiment with integrating everything from taxes to payroll services in the coming years.”
According to interviews with 50 top business executives and a survey of 1,600 more, conducted by financial IT software provider Finastra earlier this year, 85% of organizations are already implementing BaaS capabilities or plan to do so in the next 18 years. months.
Finastra said that people were switching sources of financial services and turning to non-bank channels. “This trend will only accelerate as integrating regulated products into the customer journey becomes as simple as creating a social media account,” she said.