Embedded finance drives 2-5x more revenue per user

When a tech company works with a licensed financial-service provider to make financial products (e.g., high-yield accounts, charge cards) available inside their app or website—that’s embedded finance.

Square is a well-known example. When a Square merchant receives a card payment, they can deposit those funds into their Square Checking accounts. From there, they can spend with their Square debit and/or credit cards. They can even get a Square Loan to grow their business.

For the merchant, the convenience is unmatched. They can access their funds within moments and get financing that makes sense for them. More importantly, they can manage their entire ecommerce business from the Square app.

For Square, embedded finance generates three robust new revenue streams: interchange fees, financing revenues, and revenue from interest on deposits.

Embedded finance has been shown to increase revenue per user by 2-5x. It does so by generating up to five net-new revenue streams:

1. Yield on deposits. When your customers keep funds in their embedded bank accounts, it can generate interest. You can choose to keep a portion of the interest as revenue.
2. Interchange fees. When your customers make purchases with your branded debit, credit, and charge cards, you get to keep a portion of the total transaction value as interchange revenue.
3. Financing revenues. Revenues from embedded lending and financing (e.g., merchant cash advances, invoice factoring) are some of the most attractive in fintech.
4. Payment fees. You may choose to charge your customers for certain payment types, especially those that offer enhanced speed (e.g., wire transfers, instant payouts, push-to-card).
5. Platform fees. Some platforms charge their customers a fee to access premium features like embedded banking. If you’re already charging platform fees, you may choose to increase them.

This is a common question we hear from leaders at tech companies—and it’s a great one.

The short answer is that customers increasingly expect the convenience, faster payouts, and better financing that embedded finance enables. If you don’t offer these features, you risk losing customers to competitors that do.

We recently partnered with the Harris Poll to learn how American small businesses are managing their finances. Here’s what we learned:

• 84% of small-business owners say they’d be open to getting financial services from a tech company.
• 68% say they need faster access to their money
• 62% say they can’t get the financing they need to run their businesses
• 71% believe they should be able to get a business loan as quickly as they can order something online.

In our survey with The Harris Poll, 100% of small businesses we spoke with—every single one—said they were dissatisfied with how they manage their finances today.

It’s hardly surprising. Traditional financial institutions weren’t designed to serve the needs of small businesses, and they haven’t kept up with the times.

Broadly, there are four reasons that your customers will adopt and engage with your embedded financial products.

1. Faster payouts. Your customers don’t want to wait 2-5 days to get paid. With embedded finance, you can pay them significantly faster—even on demand.
2. Better lending and financing. You understand your customers’ business models and their cash flow; you know what they need and how much they can afford to repay.
3. More tailored terms. With embedded finance, you can offer more tailored terms: fewer fees, better interest rates, and targeted rewards for the things they care about.
4. A one-stop shop. With embedded finance, you become the single app your customers use to manage every aspect of their businesses.

For many leaders at tech companies, time to market is a primary concern. 

They want to get signal on whether customers will actually adopt and engage with their embedded financial products—as quickly as possible. Fortunately, with a modern embedded finance platform, you can launch embedded banking and lending products in a matter of weeks. 

The fastest path to market involves our White-Label App. It’s a pre-built frontend for your banking and lending products; implementing it requires just one engineer and one line of code.

It’s also possible to use our pre-built UI components or have your developers build a completely custom frontend. Many companies pursue both strategies in tandem: they launch quickly with our White-Label App while beginning to build a custom frontend.