How is Embedded Finance Changing Customer Expectations of Digital Banks?

Embedded finance is rapidly changing the way consumers and businesses alike interact with financial services. As traditional banking processes are replaced by more integrated financial solutions, companies across industries are embedding payment processing, lending, insurance, and investment services directly into their platforms. 

Throughout April, The Fintech Times has focused on embedded finance. From exploring whether traditional banks are keeping up, to how embedded finance solutions could impact the future role of standalone banking apps, we have endeavoured to understand how this sub-topic is changing the banking landscape for incumbents and digital banks alike.

Continuing this theme, we asked industry experts about how they think embedded finance is changing customer expectations of digital banks. Here’s what some of them had to say.

Destabilising customer loyalty

“Embedded finance has the potential to destabilise customer loyalty to traditional and digital banks alike. Customer loyalty, as payments move from the bank’s owned app to the companies, will develop towards the company and move away from the bank,” explained Johannes Kolbeinsson, co-founder and CEO of PAYSTRAX, a fintech company offering European and UK merchants solutions for electronic payment processing, including online gateways and POS systems.

“The increasing transactions across the board, with brands building a relationship with customers through good user experiences in-app, will no doubt force digital banks to transform their loyalty programs themselves and present themselves in a new way to customers. What Revolut is currently doing with its digital experience is an interesting example of this, and it’ll be valuable to follow along as its brand story develops.”

Expectations creating tension

Chirag Patel, product manager at finova, a SaaS cloud loan origination platform, explains that changing customer expectations aren’t always for the best.

“Expectations have absolutely shifted, in some cases positively and in other cases possibly at a detriment. On one hand, thanks to embedded experiences, customers now expect one-click onboarding, real-time support and hyper-personalised offers. And while that’s great in theory, there is always a trade-off when providing financial products with such ease and convenience.

“In lending, especially mortgages, this can create tension. Borrowers want frictionless applications and fast approvals but the regulatory, underwriting and affordability requirements still heavily matter. As a result, lenders are stuck between the expectations set by consumer apps and the realities of responsible lending.

“That’s where the opportunity lies, but also the risk. The lenders and fintech providers that win will be the ones who can meet those expectations without cutting corners. It’ll be those who can embed smarter journeys not just faster ones. At finova, we’re building core systems that help lenders respond to customer expectations in a way that’s not just flashy but sustainable and compliant – especially in a constantly evolving regulatory environment.

“Because at the end of the day, the worst outcome isn’t always moving too slowly but moving fast in the wrong direction.”

Speed, simplicity, and relevance are essential

Papuna Lezhava, co-founder and CEO of KEEPZ, which recently worked with the Georgian government to facilitate digital currency payments for taxes through a QR code-based solution, says that embedded finance has “raised the bar considerably” for digital banks: “Consumers now evaluate digital banks based on their best online experiences, whether that be instant payments, intuitive design, or one-click access to services.

“Embedded finance has conditioned users to expect speed, simplicity, and relevance. Instead of a comprehensive dashboard of banking tools, they prefer services that are accessible when needed. This shift is especially visible among younger users and in markets where mobile-first experiences are the norm.

“According to a recent report, 72 per cent of Gen Z and millennials in developed markets now view a digital-only bank as their main financial institution, reflecting the rising demand for speed, simplicity, and integration. For digital banks, the challenge is no longer just about delivering a good app – it’s about building tools that work beyond the app, embedded into broader ecosystems. That is the current expectation, and it will only grow.”

Integration innovation

“Firms like Klarna, Stripe and others have enabled digital businesses to provide seamless integrations of financial services as part of their overall solutions for many areas of consumer activity, from shopping through to mobility, hospitality and fast food,” said Alex Mifsud, co-founder and CEO of Weavr, a London-based fintech enabling the integration of financial services within diverse business applications.

“Adoption in business has been slower, but will perhaps be more consequential in the long run, as provision of working capital, supplier payments, expenses management, payroll and many other areas of business-oriented financial services become integrated into the SaaS applications that most business now rely on to store their business critical data and to implement their most important workflows.

“Investment in this integration of financial services into software can be seen in everything in the digital sector. While Uber, Airbnb, JustEat and others have dominated consumer domains, Shopify, Intuit and Navan and others are leading the way in the adoption of embedded finance within business applications.

“These innovators are deeply changing customer expectations, and soon, few digital businesses will be able to avoid integrating financial services where there is a relevant place for them. This has profound consequences for both the digital as well as banking sectors as described.”

Raising the bar

“Embedded finance has raised the bar for what ‘good’ looks like in digital banking – especially when it comes to relevance, speed, and context,” adds Ben Goldin, CEO and founder of Plumery, a banking experience platform provider.

“I think customers today expect much more personalised and relevant service. As we touched on earlier, financial services need to be tailored to the specific day-to-day or occasional needs of different customer groups, rather than offering one universal solution that ends up being mediocre for everyone. Customers no longer compare their banking app to other banks. They compare it to whatever platform just gave them an instant credit line, seamless checkout, or a real-time insurance quote – right at the moment they needed it. Expectations have shifted from transactional to experiential.

“This has profound implications for digital banks. It’s no longer enough to have sleek interfaces or robust feature sets. What matters is how well those features are integrated into customers’ lives. Is the experience proactive? Context-aware? Effortless?”

Trust remains a core concern

Brian Gaynor, VP of product and CEO of BlueSnap Payment Services Ireland, also believes that embedded finance has significantly moved the dial on what customers expect from digital banks.

“By integrating payment services directly into the digital experiences they already use daily, consumers and businesses no longer view payments as a distinct function within banking. Instead, consumers expect ‘one-click’ payment options in their interactions with business, through their software platforms, whether shopping online, subscribing to services, or paying contractors and suppliers.

“Software platforms which have embedded payments within their systems have set new standards and customers expectations. When payments are embedded, customers can choose from a range of transaction methods, which they know expect as a default. This has forced banks to rethink how they offer payment services, as they’re no longer solely responsible for providing payment solutions within their own apps. Instead, they integrate their payment infrastructure into third-party platforms, ensuring that domestic and international transactions occur via a customer’s vendor of choice with ease and mobility.

“Because despite the growing integration of embedded finance, trust remains a core concern for consumers and businesses. They still anticipate the same level of security, compliance, and fraud protection in embedded payment solutions associated with traditional banking services. Payment makers want their banks to collaborate with embedded payment providers because it supports convenient access to domestic and international transactions, handled securely and efficiently.”

Ensuring availability of localised payment methods

Ciaran O’Malley, director, sales, enterprise, UK at Australian fintech Airwallex, also believes that embedded finance has led to customers wanting more personalised and frictionless experiences.

“Modern consumers are less likely to wait, as they expect instant and simple-to-use transactions. They have little tolerance for convoluted processes or fragmented user journeys that require several steps to complete a financial task.

“This behavioural shift has prompted companies to embed financial services such as payments directly into their platforms. By doing so, they provide a cohesive experience that keeps the customer within the app’s ecosystem throughout the entire transaction process. Research from Airwallex underscores the importance of this integration, revealing that 80 per cent of UK consumers would likely abandon their shopping cart if their preferred payment method were not available, such as Apple or Google Pay. Offering a variety of payment options is, therefore, crucial to cater to customer preferences.

“This is particularly true for global audiences, where the need to localise checkout processes becomes paramount. Embedded finance facilitates this by integrating local payment methods, allowing merchants to operate effectively in both local and international markets.

“The challenge of meeting diverse preferences grows with each new market entered and service required. The expectation from customers is only going to become more demanding as embedded finance continues to become more sophisticated and meet these diverse preferences. Digital banks must continue to evolve their technology or partner with fintechs that can provide this seamless integration to remain competitive.”

From ‘mobile banking’ to ‘banking anywhere’

Varun Monteiro, CEO of Finity, a back office ecosystem for recruitment businesses, concludes: “As financial services become more integrated into everyday apps, people are increasingly used to seamless, instant, and highly contextual experiences. That shift is pressuring digital banks to deliver the same level of convenience and relevance in a rapidly shifting market.

“Today’s consumers don’t just want a digital version of traditional banking. They expect financial services that are fast, frictionless, and that fit seamlessly into their day-to-day lives.

“Whether applying for credit at a checkout, splitting a bill in a food delivery app, or automatically saving spare change from purchases, people will experience banking happening in the background, often without explicitly being aware of it.

“As a result, digital banks are being pushed to go beyond offering slick interfaces. It is now about being smarter with data, more proactive with insights, and more flexible in how and where they show up.

“Embedded finance has also made partnerships essential. Banks that can integrate their services into other ecosystems, or power other platforms behind the scenes, are gaining an edge in a competitive, ever-changing financial landscape.

“Overall, embedded finance has shifted customer expectations from ‘mobile banking’ to ‘banking anywhere’. Digital banks that meet customers where they already are, without conceding trust or affecting functionality, are the ones that stay ahead in the race towards true innovation.”