Survey: Community banks see embedded finance as crucial for future

All community financial institutions are either using or considering implementing embedded banking programs, according to a survey of 300 executives conducted by fintech Treasury Prime. .Nearly every executive listed embedded finance as important to the long-term survival of their financial institution, while 60 percent said the technology was “extremely important.” Fifty four percent of executives were exploring or offering banking-as-a-service or embedded banking capabilities. Forty percent said real-time payments infrastructure is crucial to their growth strategy, slightly higher than the 36 percent who cited lending and credit decisioning automation.Embedded finance enables banks to integrate payments, lending and other banking services into nonbank platforms and applications. “While community presence remains important, it’s no longer enough to drive loyalty or long-term growth for mid-sized banks,” according to the July 8 report. “With a growing share of consumer and business banking happening online, digital innovation is now a non-negotiable.”Nearly three-quarters of executives either use or plan to use a combination of in-house and third-party technology to assist in their embedded finance programs, with only 11 percent relying completely on third-party technology. Of community financial institutions that have not completely modernized their banking technology, more than a quarter listed security and fraud concerns as the top barrier. Roughly half of executives said regulatory uncertainty is stalling digital innovation, while 45 percent said the uncertainty is encouraging them to be more proactive about compliance. More than half said their banking technology is modernized and upgraded with updated, flexible infrastructure.Thirty four percent of executives cited risk management approach as the most important consideration when evaluating fintechs, followed by 32 percent who listed security and data protection along with adhering to regulatory and compliance standards. The survey, conducted between March 23 and April 8, included banks with less than $100 billion in assets.