Brands Embrace Banking Features: Starbucks and Others Lead the Way

Brands Embrace Banking Features: Starbucks and Others Lead the Way

In an unexpected evolution, your beloved brands are taking on a banking persona, and Starbucks is at the forefront of this trend. Starbucks, renowned for its coffee, is progressively transforming into more than just a coffee chain; it’s now a coffee vendor with banking traits.

The financial figures from the previous year tell an intriguing story – Starbucks raked in an impressive $32 billion in revenue. Remarkably, a significant 41% of this revenue derived from the sale of gift cards, alongside other stored-value offerings like loyalty and rewards programs.

Picture this scenario: You step into a Starbucks outlet and purchase a $30 gift card for a friend’s upcoming birthday celebration. In this transaction, you’ve handed over $30 to Starbucks. Consequently, Starbucks holds this amount as a deposit, carrying the responsibility of returning your money when required. This parallel bears a striking resemblance to the functions of a bank.

Presently, Starbucks has accumulated an impressive $1.6 billion in deposits, outpacing the deposit holdings of over 85% of banks across the United States.

Shifting focus to Uber, a similar pattern unfolds.

For drivers associated with ride-hailing giants like Uber and Lyft, these platforms have become akin to virtual banks. Capitalizing on this paradigm shift, Uber has introduced its innovative Uber Pro card, a novel addition to their repertoire. Through the Uber Wallet, drivers can facilitate payments while simultaneously reaping rewards for their transactions.

Termed “embedded finance,” this concept emerges when entities not primarily engaged in financial services (examples include Starbucks, Uber, and Shopify) venture into providing services akin to those of banks.

These encompass an array of offerings such as payments, lending, savings, and insurance.

The result: your cherished brands, products, and even the corner coffee shop, are being redefined as fintech enablers.

While this transformation is sweeping across the globe, one continent poised to experience the brunt of this shift is Africa.

The African landscape is characterized by:

  • A population of 350 million adults with limited access to traditional banking services.
  • Mere 5-7% penetration of digital payment solutions.
  • 46% phone penetration in 2021, excluding minors.

Given the scarcity of banking avenues, consumers are gravitating toward the products and brands they engage with routinely. Embedded finance is heralding a new era wherein consumers across the continent will seamlessly interact with financial services through their preferred brands.

How do you perceive the burgeoning trend of brands incorporating banking and fintech attributes into their offerings?

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