How embedded finance is transforming software for SMBs

Become your customers’ financial operating system

Nearly 33 million small businesses operate in the United States—and the vast majority are unhappy with how they manage their money today. 

Typically, they stitch together at least 6–8 different software tools to manage their finances. It takes days or weeks to get paid. And most can’t get the financing they need to run their businesses and grow.

For these small-business owners, managing company finances is a haphazard experience. Plus, every minute they spend scanning receipts, importing transaction lists, or deciphering card purchases is a minute they’re not growing their companies. 

With embedded finance, you can help them transform money management from a black box into a growth accelerator. Your platform can become the essential tool they use to manage all aspects of their businesses, from invoicing and payments to banking, payroll, and tax prep. Meanwhile, embedded finance can generate powerful new revenue streams for your platform, including deposit fees, interchange, and increased platform fees.

If you’re a tech leader who’s thinking about how to become the financial operating system for your customers, this guide is for you. In it, we’ll explain: 

• The value of embedded finance
• How it works for business management platforms
• What it could look like on your app or website
• What it takes to launch

Editor’s note: In this guide, we use the term “software for SMBs” to refer to platforms that help small businesses manage their money. Examples include Xero, QuickBooks, and Relay.

Why customers will choose your fintech products

When a tech company works with a bank to make financial products (e.g., bill pay, automated tax withholding) available inside their app or website—that’s embedded finance. 

It’s becoming increasingly common among leading business management platforms. For example, QuickBooks, HoneyBook, and Relay have stepped up to enable access to business bank accounts. These accounts sit alongside and enhance other features like bookkeeping, payroll, and tax prep.

By making financial products available inside your app, you can simplify accounting and bookkeeping while helping your customers:

• Smooth uneven cash flow. Small-business owners typically accept payments from a variety of sources (e.g., Stripe, PayPal, ACH, wires), so it can be difficult to manage the timing of income and expenses. With embedded finance, you can provide tools (e.g., charge cards, instant payouts, invoice factoring) that help smooth uneven cash flow.

• Get actionable insights. With embedded finance, you make it easy for your customers to understand where their money’s coming from, where it’s going, and what they need to do to grow. Embedded bank accounts provide a single source of truth for all business expenses. Plus, your customers will never have to import another transaction list; the data is already there. 

• A financial operating system. Small-business owners typically rely on a patchwork of 6-8 different software tools to manage their company finances. By bringing all of these functionalities (e.g., bank accounts, bill pay) under one roof, you can become your customers’ financial operating system—the essential platform they use to manage every aspect of their finances.

Increase revenue per user—without charging more

In a challenging macroeconomic environment, many platforms are looking for ways to increase revenue per user, particularly in ways their customers won’t “feel.”

That’s because their small-business customers typically operate with lower volumes and tighter margins, especially when they’re starting out. Even a small price increase can send them looking for a cheaper alternative. 

When you offer embedded finance, you can generate more revenue from your existing product suite—without raising prices. Here are the five new revenue streams you could tap into:

‍Roofstock is a case in point. They’re a platform that helps investors buy, manage, and sell rental properties. For these investors, trying to manage their rental-property finances can be an administrative headache. In fact, many of them don’t even know whether they’ve made or lost money until it’s time to file their taxes.

To help them get a handle on their finances, Roofstock expanded their platform to include access to embedded bank accounts. Now, landlords can automate routine financial tasks like rent collection and bill payments. They can also get debit cards for each property, making it easier to track expenses. 

These embedded financial products are valuable for landlords—and also for Roofstock. Customers who use Roofstock’s embedded bank accounts have a customer lifetime value (LTV) 4x higher than other customers. They’re also three times more likely to upgrade to a premium plan.

What embedded finance could look like on your platform

To show how it works when a business management platform offers embedded finance, let's use an example.

Say you’re the VP of Product at Spire, a financial operating system that helps small businesses with cash-flow management, bookkeeping, accounting, and tax services.

Pay bills

You can enable your customers to pay their bills from inside the Spire app. In fact, you can provide multiple payment methods (e.g., ACH, check, and wire), all automatically synced with your bookkeeping and accounting functionalities.

Send and factor invoices

You can help your customers get paid faster. When they create and send an invoice, offer them the option to factor it. If they choose to do so, they’ll receive the funds immediately in their Spire Balance account. 

Expense management via branded cards

You can become the financial operating system for your small-business customers by helping them manage corporate spend via branded cards. For example, a small-business owner could create a virtual debit card dedicated to a specific vendor (e.g., Google Ads) and assign it a monthly spending limit. Transactions can be tagged by project and spend category for easy bookkeeping.

What it takes to launch embedded finance

Many product leaders assume that it will take years and a large investment of developer time to launch embedded finance. In fact, you can go live in 2–3 months. 

Unit is a financial infrastructure platform that helps tech companies make embedded banking products available to their customers. To date, hundreds of leading platforms and marketplaces have trusted us to help them launch and scale their embedded finance programs. 

Here are a few of the reasons why leading tech companies choose Unit:

• Technology. We provide all of the infrastructure you need to launch embedded banking and lending products. With our White-Label App, you can launch with a single engineer and a single line of code.

• Bank partners. We offer a robust network of high-quality bank partners. We’ll introduce you to one or more banks that align with your target audience, use case, and goals.

• Compliance. Our compliance program is led by compliance and risk veterans with decades of industry experience. They’re here to help you understand and meet the compliance needs of your bank partner.

• Underwriting and capital. Underwriting is deciding whether and how much to lend to your customers. It’s hard to get right, and most companies don’t have the necessary expertise. Fortunately, Unit facilitates this part of the process, as well as providing access to the capital you need to support your lending program.

• Premium support. Throughout your onboarding and after launch, you’ll have access to a customer success manager, a compliance lead, and our solutions engineers. They’ll swiftly address any questions that arise.

If you’re thinking about how embedded finance can help you simplify business finances and become an all-in-one platform, please reach out. We’d love to brainstorm with you.