In Switzerland, the adoption of embedded finance is growing rapidly, with 76.3% of consumers having used banking services integrated into non-financial apps and platforms, according to a study by tech consultancy Synpulse.

This data, collected from a survey and interviews with 1,026 consumers and more than 70 industry stakeholders between October 30, 2023, and April 27, 2024, reflects high adoption across major consumer groups.

The report, released in September 2024, reveals a clear correlation between digital skills and the likelihood of using embedded finance services, with higher digital skills being associated with higher usage rates and lower rejection rates.

Among Swiss embedded finance users, 64.6% reported having good or very good digital know-how, with 46.5% falling into the “good” category and 18.1% in the “very good” category. Within this group, only 28% express reluctance to use embedded finance services.

In contrast, among individuals with “partial”, “rather poor”, or “very poor” digital skills, only 35.4% were embedded finance users. Usage rate significantly dropped as digital skills declined, with 72% of people in this category expressing reluctance to use embedded finance services. Specifically, 46.7% were somewhat opposed.

The study also examined the drivers behind the adoption and usage of embedded banking services. Speed and efficiency emerged as the primary motivators, cited by 43.5% of respondents, followed by cost savings (17.8%). Access to banking services, increased security, and personalization ranked in subsequent positions.

Adoption of embedded finance among non-banks

Despite robust consumer interest, only 40% of surveyed “embedders”, or the non-banking companies that could integrate financial services, offered embedded banking services, while 60% did not.

Reasons for not integrating these services included a lack of understanding (33%), ongoing evaluations of these services (22%), and unfamiliarity with the concept (11%).

That being, 55.5% of respondents expressed potential interest in offering embedded finance, while only 11% categorically were firmly against it. This indicates strong growth potential.

Looking at the most prominent embedded finance products offered by non-banking companies, the study found that more than 20% of participating embedders provided retirement planning, financing, and payment services. More specifically, private accounts and QR payments (14.3%), digital mortgages (15.8%) and third-pillar offerings (60%) were the most offered products within these verticals.

Adoption of BaaS

The study also looked at the adoption of banking-as-a-service (BaaS) among Swiss banks, revealing a growing recognition of the offering’s strategic importance.

Of the banks surveyed, 35.1% said they were already engaging in BaaS collaborations with other banks and non-bank organizations, indicating strong momentum. However, 64.9% had not entered the space yet, stating that were currently evaluating their options (29.2%), did not understand it sufficiently (25%), and had made a deliberate choice not to proceed with such offerings (25%).

When examining current BaaS services, payments emerged as the most prevalent BaaS offering (36.8%), followed by retirement planning (19.7%) and financing at (17.1%). Savings services were the least represented, making up only 10.5% of existing BaaS portfolios.

Banks were also asked about their views on the revenue potential of different banking services within BaaS. Their answers varied with investment services leading at 80%, followed by savings at 75%. Financing and retirement planning were perceived as less lucrative, with 58.3% and 59.1%, respectively. Yet, each category achieved over 50% in revenue potential, underscoring the financial viability across the spectrum of BaaS offerings.

New embedded finance partnerships

The embedded finance industry in Switzerland is expected to grow by 5.7% annually through 2029, fueled by the integration of financial services into digital platforms, according to ResearchAndMarkets.com.

In October 2023, embedded finance specialist additiv supported Coop in launching Coop Finance+ app, a comprehensive app for integrated financial services. At launch, Coop Finance+ offered banking services, payment transactions and pension solutions, in collaboration with Hypothekarbank Lenzburg,Vanguard, OLZ, Liberty, and Glarner Kantonalbank as service providers orchestrated on additiv’s platform.

More recently, in July 2024, Swiss4 introduced a financial app utilizing technology from Marqeta, a company that specializes in modern card and payment solutions. This app combines financial services and high-end lifestyle management, featuring a multicurrency account, payment and foreign exchange services, as well as services for organizing activities such as travel, hospitality and gastronomy.

Featured image credit: edited from freepik