Embedded finance: a solution for supercharging loyalty?

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Embedded finance: a solution for supercharging loyalty?

Cultivating a community of loyal customers is the key behind every successful brand, and the best brands enhance loyalty and engagement through tailored programmes designed to keep customers coming back – and spending more. According to research, as many as 84% of consumers say they’re more likely to stick with a brand that offers a loyalty programme, while an additional 66% say that the ability to earn rewards changes their spending. Additionally, in today’s high inflation economy, 90% of consumers say they are more interested in getting discounts, using coupons and earning cashback rewards when they shop than ever before.

what is embedded finance
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Although many brands offer rewards schemes – from coffee shops and restaurants to retailers and service providers – very few businesses offer solutions that go beyond traditional points-based systems. These types of loyalty programmes are now table stakes, posing a challenge to brands that want to differentiate themselves and establish true loyalty.

financial services what is embedded finance

Today, embedded banking and embedded financial services offers an opportunity for brands to supercharge their loyalty programmes with integrated financial services that offer real, tangible value; here’s what the  next-generation of loyalty schemes will look like.

The challenge: standing out from the crowd

future of embedded finance

Consumers today expect a first-class customer experience and want to be rewarded for their business, yet brands continue to offer old-school loyalty strategies. Instead, customers want access to personalised offers that make a tangible difference to their lives – studies show that the majority of customers prefer loyalty programmes with exclusive access to products and services. By providing customers with financial benefits that make a real difference to their lives, businesses can carve out a competitive advantage and build new revenue channels. 

The embedded finance solution

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Today, Banking-as-a-Service (BaaS) enabled embedded finance and embedded financial financial services are helping brands innovate their existing loyalty schemes, helping them to build deeper relationships with customers.

For example, BaaS gives brands the ability to integrate payment solutions into their existing loyalty card or app. Target’s REDcard, which offers shoppers an instant 5% cashback, is one of the most successful examples of this. Target found that REDcard members increased their shopping carts by 50%, with REDcard spending contributing to over $8.9 billion in volume annually and 12.1% of all Target sales.

The Starbucks rewards platform is another powerful example of embedded finance in action. The app, which enables customers to load funds into their accounts and earn rewards, pay for purchases and pre-order using their smartphone, boasts 28.7 million members in the U.S. alone, up 16% year-over-year, and was responsible for driving 55% of the company’s US operating revenue in Q4 2022.

Additionally, flexible lending products like Buy Now, Pay Later (BNPL) can also be integrated into loyalty schemes, which increases choice and helps drive conversion – research has found that eCommerce retailers offering BNPL see a 2.1% average higher conversion rate. 

While embedding BNPL at the point of purchase provides loyal customers with convenient access to credit during the checkout journey, brands can also boost their existing loyalty programmes by leveraging valuable spending data; personalised rewards and discounts driven by purchase data is just one example.

Embedded finance is new way to gain loyalty

Loyalty is changing. In a world where consumers expect more from the brands they know and love, embedded finance and embedded payments is fast becoming a differentiator for retailers looking to create new and enhanced customer experiences, and disrupting traditional loyalty programmes is a compelling use case.

If you’d like to learn more about how we can help to innovate your loyalty programme with embedded finance, get in touch today.

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