Key Takeaways
- Embedded finance allows business software providers to seamlessly offer financial services on their platform, under their brand
- Software providers can unlock hidden revenue with embedded solutions including payment acceptance, business checking and high-yield savings accounts, lending, and more
- Critical partners make embedded finance possible and secure, including business software-as-a-service (SaaS) providers, fintechs, and bank sponsors
Legendary private equity firm Bain Capital projects embedded finance transactions will exceed $7 trillion annually in the next few years.1 The potential for white-labeled financial services offered on B2B SaaS platforms to unlock new revenue streams is immense. But what is embedded finance, exactly? What services does it encompass, and how large of an opportunity is it?
What is “embedded finance”?
“Embedded finance” refers to a suite of financial services B2B Software-as-a-Service (SaaS) providers can incorporate into their platform. SaaS providers who add embedded finance can unlock up to five times more revenue from their existing client base and stand out from their competitors.2
The products available through embedded finance vary widely depending on the partner, but the most profitable for many SaaS platforms include business checking and high-yield savings accounts (often referred to as “Banking-as-a-Service”), payment acceptance, accounts payable, and lending.3 The more comprehensive financial services SaaS providers offer, the greater incentive their customers have to stay on-platform, where they can potentially be introduced to even more cross-sell and optional upgrade opportunities.
The best embedded finance partners commit to helping SaaS providers offer these services not only on their platform but under their brand. This strengthens brand identity and customer loyalty and creates the kind of omnichannel experience 90% of customers expect.4 It’s a powerful combination of hard and soft benefits.
Why should I consider adding embedded finance to my software platform?
Embedded finance helps vertical SaaS providers unlock revenue streams among their existing customer base, increase customer loyalty, reduce churn, and gain a competitive advantage. These benefits prove especially valuable to Independent Software Vendors (ISVs) and eCommerce marketplace and Enterprise Resource Planning (ERP) platform providers.
These vertical SaaS companies often start by solving a specific problem for a specific customer. For example, a platform custom-built for the unique needs of a music store owner. Clerkhound knew music stores – but they didn’t have the expertise to build a comprehensive financial solutions backbone. Maast served as their embedded finance partner to provide business checking accounts and payment acceptance on their platform and under their brand. Today, their customers have a comprehensive music store operating system, a variety of ways to collect money from their clients, and an easy way to follow the money they make from their payment source to their bank account and beyond.
The reality for many B2B vertical SaaS providers face is that offering some level of embedded financial services is table stakes to compete in the marketplace. As many as 89% of software companies already have at least one integrated payments partner.5
Expanding and diversifying embedded finance experiences is a way to get ahead of the competition while unlocking valuable additional revenue.
Embedded finance is valuable to SaaS customers because it centralizes their business operations, becoming a super app in their vertical. Customers also get financial services from a provider that understands them and their industry, potentially opening up more and better-priced products than they could get from a traditional bank.
How much additional revenue could I earn by adding embedded finance to my SaaS platform?
The revenues generated by embedded financial products on your platform can significantly boost your bottom line. The size of financial benefits can vary significantly based on the number of your customers who adopt, your industry, and the financial products that you select.
- Payment acceptance revenues usually come from the amount and volume of transactions made on your platform
- Business checking and high-yield savings account revenues derive from the average daily deposit volume your customers keep on your platform
- Lending revenues are driven by the amount of loans and/or lines of credit generated by your platform and are usually a percentage of the principal balance and may include a participation rate in the interest
When evaluating potential embedded finance partners, you may want to consider not only the revenue share offered, but the amount of support you and your customers are likely to receive, and the amount of risk protection. The right partner for you and your business may offset lower revenue share with a hosted and automated customer application process, faster approvals, and ongoing customer service.
Who makes embedded financial services on my platform, under my brand possible?
In general, there are four parties involved in successful embedded finance solutions:
- SaaS providers offer simple payment experiences like recurring billing and access to digital wallets like Apple Pay, mobile business checking accounts, and same-day payment fulfillment with a simple onboarding process.
- Fintech companies like Maast facilitate the payment experience, underwrite the customers, and provide the banking and lending technologies, manage customer questions, and more.
- Bank sponsors process the payments and hold the balances, offering FDIC protection. Maast’s bank sponsor Synovus Bank, Member FDIC, is one of the most innovative banks in the Southeast.
- Customers sign up for banking, payment acceptance, and other services. They benefit from a greater experience on the platform they trust, potential cost savings realized when the SaaS provider opens additional revenue, and access to greater financial tools by sharing their information.
Where are the embedded finance services hosted?
Quality embedded finance partners not only ensure you’re first in line for profits, they also provide a seamless, branded customer experience – supporting your brand with their technology.
It starts with a fully secure customer application designed to fully match your brand standards, including logos and fonts. Secure APIs and a single-sign-on make transferring data safe, easy, and seamless for your customers. Communications and approvals are made by the embedded finance partner for and as you – ensuring that your business gets credited with your customers’ positive experience.
Customers link to their bank accounts and payments portal through a link on your platform – again enjoying a seamless branding experience. They can even get physical debit cards under your logo.
And if the customer has a problem? Experts in embedded finance who also understand your business and value proposition answer their questions through email and chat support.
When can I get started?
You can schedule a 30-minute discovery call right now. Just click here to find a time that works for you. You can also email us and start the conversation.
1 Source: Matt Harris et al. “Embedded Finance: What It Takes to Prosper in the New Value Chain.” Bain Capital. Sept 2022.
2 Source: Kristina Shen et al. “Fintech Sales Vertical SaaS.” Andreessen Horowitz. 4 Aug 2020.
3 Banking products are provided by Synovus Bank, Member FDIC.
4 Source: “2023 Software Study Report.” The Strawhecker Group. July 2023.
5 Source: “2023 Software Study Report.” The Strawhecker Group. July 2023.
