Embedded finance is taking the business world by storm, promising new revenue streams and unique ways to enhance customer engagement. But what does it really mean for your bottom line? Is this trend worth your time—or has the opportunity already passed?

This article digs into the numbers, real-world applications, and potential benefits of adding embedded finance to your company. You’ll see how it can impact your revenue, attract more customers, and create meaningful, profitable connections. Here’s why embedded finance is a revenue-generating powerhouse you don’t want to ignore.

In this article, we’ll cover:

What is the Revenue Potential of Embedded Finance?

Revenue Impact for Your Businesses

Revenue Stream Options

Why Would Someone Pay You For This Service?

Real-Life Revenue Stream Examples

Should You Add Embedded Finance to my Company?

 

What is the Revenue Potential of Embedded Finance?

Embedded finance is a hot topic for nearly every business, generating billions of dollars worldwide, increasing revenues, and attracting new customers. With all the conversation surrounding it, it may feel like the last train has left and we’ve missed the opportunity. However, BCG’s analysis reveals that less than 20% of the potential market has been addressed, meaning you are not too late to join the party.

The global embedded finance market is expected to generate $164 billion in revenue in 2024, with projections reaching between $385 billion and $533.96 billion by 2029, growing at an annual rate of 30%.

For context, in 2023, about 40% of European consumers expressed a preference for using online channels for car financing, and nearly 30% indicated they wanted to purchase their next car entirely online. Additionally, 70% of young consumers have already purchased or plan to buy nearly everything via social media. This is why over 74% of European businesses plan to launch integrated financial solutions, and 64% aim to deliver these offerings by 2025.

 

Revenue Impact for Your Businesses

Companies, particularly software companies, like SaaS, are poised to amplify their revenues by 3–4 times. The reasons for that can be the ability to upsell the clients with an additional service at an additional cost. However, integrating embedded finance into business models has been shown to also significantly enhance customer lifetime value (CLV) and conversion rates:

Some businesses have reported tripling their CLV within six months of implementing embedded finance solutions,

Companies can achieve a 35% increase in conversion rates by optimizing checkout design, which often includes embedded payment options.

 

Revenue Stream Options

Subscription Fees for Premium Services: Offer premium financial features—such as priority support, higher credit limits, or e-invoicing;

Revenue Sharing with Partners: Integrate third-party financial products into your platform and earn a percentage of the profits generated, a great example of that is revenue-shared payment processing;

Transaction Fees: Charge fees on each transaction processed through embedded payments, whether for purchases, subscriptions, or other services on your platform. This applies to payment processing, lending, and insurance services.

Interest Income: If you offer embedded lending, earn interest on loans provided through your platform, including short-term credit options for customers.

Interchange Fees: If you embed payment card services, your platform can earn interchange fees on card transactions made by users.

Data Monetization: With appropriate consent, analyse and monetize user data insights for third parties with valuable market insights based on transaction behaviours and spending patterns.

Referral Commissions: Partner with banks or financial institutions and earn referral fees for directing users to their services, such as lending, insurance, or savings products integrated within your platform.

 

Why Would Someone Pay You For This Service?

Before embedded finance, obtaining loans from banks was cumbersome, and online payments often required being redirected from store websites to unfamiliar transaction sites, creating trust issues. Users now expect a seamless experience, and businesses without embedded finance not only lack an advantage but also fall below industry standards. Therefore, embedded finance focuses on convenience, speed, and efficiency for both clients and businesses. Let’s explore the problems it addresses:

Reducing Friction in Financial Transactions: Traditional financial processes often require users to navigate multiple platforms, resulting in a fragmented experience.

Expanding Access to Financial Services: Embedded finance can reach under-banked or underserved populations by integrating financial services into platforms they already use, promoting financial inclusion.

Revenue Potential: It enables clients to generate revenue streams through services like revenue-shared embedded finance.

 

Real-Life Revenue Stream Examples

Starbucks Rewards Platform: allows customers to load funds, pre-order, pay for purchases, and earn loyalty rewards. With 28.7 million users in the U.S., it generated 55% of Starbucks' U.S. operating revenue in Q4 2022.

Uber: provides access to various ride-hailing options to increase fare opportunities and offers customized financial solutions, including Uber cards, a digital wallet, and an instant pay feature that allows drivers real-time access to their earnings.

Enty: helps clients open a company in Estonia, offering quality legal services. They also provide a comprehensive management system, charging a subscription fee that enables clients to manage and invoice remotely. Invoices include payment links for faster transfers.

Opensolar: offers their software for free and monetizes solely through embedded finance. This strategy aims to achieve rapid market adoption as a counter to competitors that charge $1,500-$3,000 per year per user for their software.

Shopify: ten years after its founding, Shopify made half of its revenue from subscriptions, with the other half coming from transaction revenue. From 2016 onward, transaction revenue began to significantly exceed subscription revenue.

As Shannon Scott, Global Head of Product at Airwallex, stated: "With subscriptions, you grow with the number of customers you have. With embedded finance, you grow with the transactions of your customers".

 

Should You Add Embedded Finance to my Company?

Embedded finance is no longer exclusive to big tech or financial services providers. E-commerce, SaaS, fintech, retail, hospitality, media, and automotive firms are increasingly adopting it to gain a competitive edge. The decision to implement embedded finance depends on the business problems and customer needs you’re addressing, the markets you’re entering, and your business model. Consider the following guidelines:

How close is embedded finance to your product or service?

With the rise of APIs, integrating embedded finance is easier than ever, allowing businesses to implement solutions quickly, often within a week. One such API is Space Invoices, which supports integrated payment links in your invoices and payment processing. If you’d like to learn more about how we can assist you, please contact us.

 

Additional reading:

• 3 Best White-Label Invoicing APIs for B2B SaaS, Fintech, and Neobank Platforms
• Ask Your Developer: Key Insights for the Build vs Buy Debate in Invoicing API
• Bosnia and Herzegovina Implements VAT on Non-Resident Digital Service Providers