In today’s digital-first economy, banks and other traditional institutions are no longer the only places to get financial services. As embedded finance becomes more popular, businesses in all fields are easily adding payment and banking features to their systems. Embedded finance is changing the way businesses interact with customers and make money. For example, many retailers now provide buy-now-pay-later (BNPL) alternatives, while software as a service (SaaS) companies increasingly offer fast payouts.
This change isn’t just about making things easier; it’s also about opening up new, powerful ways to make money. Let’s look at how businesses are using embedded finance to make their payment systems a profitable growth engine.
What is Embedded Finance?
Embedded finance is when financial services like payments, loans, insurance, or investments are built into systems that don’t deal with money. Companies don’t send consumers to third-party financial services anymore; instead, they put these services right inside their own systems.
For instance, ride-hailing apps like Uber give drivers rapid access to their earnings (embedded payments), and e-commerce platforms like Shopify give merchants cash advances (embedded financing). The idea is to make experiences that are easy to use and add value, which will increase customer loyalty and open up new ways to make money.
Why Embedded Finance is Booming
There are a number of reasons why embedded finance is becoming so popular so quickly:
- Digital transformation: Customers want smooth, integrated banking experiences as businesses move online.
- APIs and open banking: The emergence of API-driven ecosystems makes it easy for financial infrastructure and non-financial enterprises to work together.
- Personalization based on data: Businesses can use payment data to create personalized financial solutions, which boosts engagement and conversion rates.
- Customer convenience: Embedded financing makes buying easier by removing obstacles, which speeds up and makes transactions more reliable.
Bain & Company says that the worldwide embedded finance market would be worth more than $7 trillion by 2030. This shows that this isn’t just a passing trend but a big change in how businesses work.
How Enterprises are Monetizing Payment Infrastructure
Having or controlling payment infrastructure lets businesses go beyond just making transactions and start making money from the flow of money itself. Here are the main ways that businesses are making money with embedded financial solutions.
Building In-House Payment Platforms
Companies that handle a lot of transactions are building their own payment systems instead of only using those of other companies. They can lower interchange rates, have more control over transaction data, and offer diverse payment experiences by doing this.
For example, big stores like Walmart have built their own finance tools to handle payments and financing for customers. This method not only saves money, but it also lets businesses make money by offering services like credit issuance, loyalty rewards, and cross-selling financial products.
Offering “Payments-as-a-Service”
Some businesses are leveraging their strong payment systems into services for other businesses. They let smaller firms use their infrastructure by making their financial APIs or white-label payment platforms available to the public.
For instance, Stripe and Adyen were the first to offer Payments-as-a-Service, which lets businesses add payment options with little extra programming work. Transaction fees, service subscriptions, or value-added analytics can all bring in constant income.
Introducing Embedded Lending and Credit
One of the fastest-growing areas in this field is embedded financing. Platforms can give customers quick credit lines, payment plans, or BNPL services right at the point of sale, without them having to leave the ecosystem.
This not only increases sales and keeps customers coming back, but it also opens up a whole new source of interest income. More and more SaaS providers, marketplaces, and logistics platforms are adopting embedded lending to give consumers money, which helps their cash flow and lets them make money on repayments.
Enabling Cross-Border Payments and FX Services
Global companies are embracing embedded finance to make cross-border payments easier and more profitable. They don’t work with outside banks; instead, they add embedded foreign exchange and remittance features directly to their platforms.
This helps lower the cost of transactions, speed up processing times, and make money from exchange rate margins. This is especially useful for businesses that operate internationally, such marketplaces or gig platforms, because it makes them more efficient and profitable.
Leveraging Data for Financial Insights
Companies can get real-time transaction and behavior data with embedded finance. You can use this data to make predictions, offer personalized financial solutions, or even sell anonymised analytics to other companies.
For instance, a B2B platform that lets users make payments right on the site might look at how their cash flow changes over time to give personalized credit lines or changing prices. Embedded finance is one of the most underdeveloped but profitable areas of digital business for making money from data.
Benefits of Embedded Finance for Enterprises
Using integrated finance isn’t simply a way to make money; it’s also a smart decision that improves customer connections and the long-term value of your business.
- Keeping more customers: Integrated payment and credit solutions maintain customers in the ecosystem, which lowers churn and raises lifetime value.
- Different ways to make money: Companies make money from transaction fees, commissions, loan interest, and partner integrations, in addition to selling their main products.
- Better experience for customers: Seamless, one-click financial services make things easier and more satisfying, which is important for digital loyalty.
- Innovation Based on Data: Having access to a lot of payment data lets you make better judgments about pricing, promotion, and products.
- More quickly growing the market: Embedded finance makes it easier to get into new areas and verticals more quickly without having to deal with complicated banking agreements.
Challenges and Compliance Considerations
Embedded finance has a lot of potential, but it also has some problems. Businesses have to deal with rules, data security, and the reliability of their partners. Companies need to make sure that their financial activities are open, that they don’t commit fraud, and that their customers are safe.
It is also very important to keep trust. Customers want financial-grade security and privacy, which means that businesses need to keep spending money on secure APIs, encryption, and fraud monitoring systems.
The Future of Embedded Finance
The next generation of embedded finance will include more than just payments and loans. We will see more and more insurance, investments, and decentralized finance (DeFi) solutions work together. AI and open banking APIs are getting better all the time, and so is embedded finance. It will be able to predict what users need and give them personalized financial services at the correct time.
Companies who adapt early will have a big edge over their competitors. Not only will they get more people to interact with their business, but they’ll also get a piece of the trillions of dollars that go through digital payment systems.
Conclusion
Embedded finance is changing the way businesses think about payments. Instead of seeing them as a cost center, they see them as a way to make money. Businesses can improve client experiences, open up new sources of income, and make sure their operations are ready for the future in a world that is quickly becoming more digital by adding financial services to their platforms.
As businesses keep coming up with new ideas, the barrier between financial and non-financial organizations will become less clear. This will lead to a time when every business is, in some way, a fintech.