Embedded finance is projected to reach a global market value of $7.2 trillion by 2030, highlighting the immense growth and potential of this sector.1 This rapidly expanding market is switching up how small-to-medium-sized businesses (SMBs) access financial products, creating exciting new opportunities for software companies to reimagine their business models and restructure their product offerings. Embedded finance is the link between customer needs and traditional finance limitations, presenting significant opportunities for software platforms that offer integrated financial solutions to fuel future growth.
The preliminary statistics on embedded finance and its impact are significant.
- 90% of businesses consider access to financial products and services as critical to their operations
- 76% are willing to pay a premium for such a one-stop-shop solution across financial products
- 2-5X higher customer lifetime value and 30% lower acquisition costs for platforms with embedded finance
Embedded finance is creating new revenue streams for software companies and increasing customer satisfaction. To stay competitive today, software companies should plan to stay on top of the latest embedded finance trends and strategies.
Below are the top 3 trends and associated benefits to look out for this year.
Embedded finance trend #1: More complementary embedded solutions
Embedded Payments are the first step for software platforms wanting to integrate financial services. Payments can then act as a launchpad for a variety of complementary solutions such as lending, business accounts, card issuing, and more. Each brings many benefits like increased transaction volumes for software platforms and stronger growth for their customers. For instance, SMBs with access to working capital may see their Gross Merchandise Value increase by 36% and that creates a virtuous circle of benefits.
Embedded finance trend #2: Real-time integration, real big opportunity
Real-time integration enables software companies to seamlessly offer additional financial services to their customers without the hassle of coordinating with outside vendors or dedicating internal development resources. This streamlined approach allows teams to focus on core business strengths while delivering enhanced value to their users.
Embedded finance trend #3: Ultra-personal services
Business today is fueled by data, and the future will be even more so. Software platforms will be digging even deeper into their customer data to offer highly personalized financial products, such as customized loan rates. This data-driven approach ensures that services are relevant, timely, and meet very specific customer needs that enhance the overall user experience.
Embedded finance and the role of a strategic Embedded Payments partner
Now that some of the latest trends in embedded finance are clear, consideration should be given to how they will be implemented. Aligning with a strategic and knowledgeable embedded payments partner that can grow alongside evolving industry needs is essential for maximizing and refining the opportunities ahead.
Ian Hillis, Head of Growth at Worldpay for Platforms, has his finger on the pulse in the world of embedded finance and discusses his expertise on an episode of The PayFAQ: The Embedded Payments podcast. He highlights how software companies are perfectly positioned to embed financial services into their platform by the nature of their business model as well as their customers reliance and appreciation for their verticalized platforms.
“The relationship between an SMB and the vertical operating system is extremely close and trusted. And that vertical operating system also sits on more data related to the business customer than anyone else in the value chain, including its bank,” shares Ian. “This coupled with the fact that employees and these operators are spending 80-95% of their time within that particular system, means that they’re bestowing a lot of trust to the particular vertical system.”
Ian believes that SMBs are more likely to engage with products presented to them within their day-to-day workflow. “We’ve watched these vertical operating systems start to offer more products beyond just the core workflow management” and seen early indicators of success.
Embedded finance isn’t just an emerging trend—it’s a powerful lever for growth. By integrating financial solutions, software platforms can not only meet evolving customer needs but also unlock new revenue streams and set themselves apart in a competitive market.
1 The Paypers Embedded Finance and Banking-as-a-Service Report 2024.