While subscriptions have been the foundation of most SaaS business models, they are no longer the only - or even the most profitable - way to generate revenue. Companies are looking for ways to add more value for their users, create seamless experiences, and diversify their income streams. Enter embedded finance - a transformative model that allows SaaS businesses to integrate financial services directly into their platforms.
Embedded finance is not just a buzzword; it’s a massive opportunity. By 2030, the European embedded finance market could surpass €100 billion, making it one of the fastest-growing sectors in fintech. For SaaS companies, this means now is the perfect time to explore how financial services can enhance their offerings and drive growth.
In this blog, we’ll take a look at how SaaS businesses can seize the embedded finance opportunity.
What is embedded finance?
Embedded finance refers to the seamless integration of financial services - such as payments, lending, cards, and banking services - within non-financial platforms. Instead of redirecting users to external banks or payment providers, these services are built directly into SaaS products, making the user experience smoother and more convenient.
Think about an invoicing software that allows businesses to accept payments instantly rather than relying on third-party providers. This is an example of how embedded finance enhances the user experience, while creating new revenue streams for SaaS companies.
The adoption of embedded finance is skyrocketing, with 56% of companies already incorporating financial services into their platforms. As more businesses recognise its potential, embedded finance is quickly becoming a must-have rather than a nice-to-have.
How SaaS companies can embrace embedded finance
For SaaS companies, adopting embedded finance starts with identifying the right use case. Not every platform needs lending or card issuing – but, the key is understanding user pain points and finding ways to remove friction.
Once a company decides to embed financial services, the next step is choosing the right approach. Some businesses attempt to build financial services in-house, but this can be costly and requires strict compliance with financial regulations, which can be particularly complex when internal teams may not have specialised knowledge. Instead, many SaaS providers partner with fintech companies, allowing them to launch financial services faster and with less risk.
SaaS platforms that successfully implement embedded finance can see remarkable results - those offering financial services have the potential for three to four times the revenue growth compared to those that don’t.
The most compelling use cases for embedded finance in SaaS
While embedded finance offers a variety of opportunities, some use cases are particularly well-suited for SaaS businesses:
Embedded payment cards
Branded payment cards are a powerful way for SaaS platforms to enhance their offering. For example, SaaS platforms catering to freelancers or gig workers can provide prepaid or debit cards, allowing instant access to earnings. Corporate SaaS tools can issue business expense cards, streamlining financial management. Besides boosting customer retention, SaaS companies can generate revenue from interchange fees on card usage.
E-money account
E-money accounts allow businesses to hold and manage funds directly within a SaaS platform. With these accounts, businesses can facilitate instant transfers, automate payouts, and reduce dependence on traditional banks, giving users a more integrated and seamless experience. By also integrating payment functionalities, SaaS platforms not only enhance convenient and efficiency, but can increase users’ lifetime value and capture valuable transaction revenue.
Discover how Countingup built an award-winning business current account (e-money), designed for sole traders and small limited companies.
The benefits of embedded finance for SaaS companies and their users
Why are so many SaaS companies adopting embedded finance? Because it offers major benefits – let’s take a look at them:
- New revenue streams: Subscription-based revenue is predictable but limited. Embedded finance allows SaaS companies to earn from transaction fees, interchange, and lending margins, making their business model more resilient.
- Higher customer retention: When users rely on a SaaS platform not only for software functionality but also for financial transactions, they are far less likely to switch to a competitor. This deeper integration fosters long-term loyalty and increases customer lifetime value.
- Elevated user experience: Customers benefit from more convenient financial transactions, easier access to credit and popular banking-like products, all within the platform they already trust. By reducing friction and streamlining workflows, SaaS companies can enhance the overall user experience, leading to higher satisfaction and increased engagement.
Key considerations when adopting embedded finance
While embedded finance presents exciting opportunities, SaaS companies must carefully consider the following factors:
Regulatory compliance
Offering financial services come with strict regulations. SaaS companies must ensure they either work with licensed providers or obtain the necessary licences and certifications themselves. The latter option often involves a significant financial commitment and may require years to complete the processes.
Customer trust and security
Handling financial transactions means managing sensitive data. SaaS businesses must prioritise robust security measures, fraud prevention strategies, and transparent policies to build trust with users.
Seamless integration
Embedded finance solutions should feel like a natural extension of the SaaS platform, not an add-on that complicates workflows. Companies should ensure that financial features enhance, rather than hinder, the user experience.
Watch on demand:
Key considerations to choose the perfect embedded finance partner
In conclusion
The SaaS landscape is changing, and embedded finance is emerging as a key differentiator. As companies seek to provide more value to their customers and create sustainable revenue models, integrating financial services will soon become a necessity rather than an option.
With the embedded finance market growing at an unprecedented rate, SaaS businesses that embrace it early will gain a significant competitive advantage.
For companies looking to get started, the key is to identify user pain points, determine the most valuable financial services to embed, and choose the right partners. As SaaS continues to evolve, embedded finance will play a pivotal role in shaping the next generation of software platforms - making them more powerful, seamless, and indispensable to users.
How we can help you with embedded finance
Explore how we can support your SaaS platform to integrate financial services and take your product offering to the next level.
