It’s no secret that today’s fiercely competitive market and margin pressure demand a progressive approach. So to ward off what’s becoming a deafening shout, software companies are turning to embedded finance. Airwallex gives ambitious companies the tools they need to add financial services to their propositions. Book a demo with them today.
Adding financial services to an existing product effectively enables any business to adopt the same capabilities as a fintech, without the need to obtain their own licence or build out financial partnerships and integrations. This can open up a wide range of fast-to-launch economic opportunities to increase a business’s overall addressable market, differentiate its existing offering or build entirely new business models.
Described as a key trend for 2023 by Forbes, embedded finance has an estimated market value of over US$138 billion in 2025, with most momentum in the lending and payment spaces. According to Andreessen Horowitz, SaaS businesses that embed financial tools increase revenue per user by 2 to 5x* (versus a standalone software subscription).
The rush to embed financial technology is shaping up to be an arms race. With more and more companies riding the embedded finance wave and putting it front and centre of their 2023+ strategy, those without financial technology capability will soon find their products outmanoeuvred.
Offering financial services can be lucrative but obtaining a banking or payments licence is arduous and expensive. Since most companies simply don’t have the resources for this, what’s the alternative?
Airwallex gives ambitious companies the tools they need to add financial services to their propositions, without building these themselves or needing a licence. By leveraging fintech, companies with global aspirations can grow their revenue streams.
As a provider of embedded finance services, we’ll guide you through how embedded finance is developing and how we’re seeing customers harness its potential to generate new income streams. We’ll also delve into the specific embedded components that will make your product stickier.
Embedded finance: A definition
Embedded finance lets (typically non-financial services) software companies integrate financial services into their own tech stacks via API and apply the new functionality to themselves and their own customers. These financial services include accounts, payment processing and acceptance, card issuance, lending and FX to name a few. In essence, it allows a non-financial software business to develop its own financial ecosystem with its customers.
We’re still discovering the potential of embedded finance. This is largely due to the versatility of embedded finance means that there’s far-reaching potential across both B2B and B2C use cases. That’s because embedded finance creates internal efficiency, such as streamlining treasury and payment operations, while also creating external opportunity, by diversifying and deepening your existing offering. To translate that into revenue terms, it also generates new income streams, facilitates market and global expansion and importantly, delivers more value to customers.
Internal efficiency: Boosting operations
By bringing financial functionality in-code, you can build your financial infrastructure around your product and team, as opposed to your product and team working around your financial infrastructure. With an efficient account and payments infrastructure, reconciliation can be automated and cash kept flowing through the various business entities. Needless to say, the finance team can put their time to better use.
External opportunity: Boosting experience
Embedded finance is incredibly important on the customer-facing side of things, too. With online scams becoming increasingly sophisticated, the need for users to trust the financial products they’re using has never been greater. By embedding payments into your product, you can manage customer payments within your platform. This means users can stay on their preferred platform, instead of being redirected to a third party to pay for something. Not only does this reduce payment friction, it creates a more seamless journey and assured customer experience overall, too.
Imagine you’re a takeaway delivery app. You already use a payments gateway to accept payments from customers across the UK, mainland Europe and the Nordics. You’re in a constant battle to acquire new restaurants and chains to use your app above others. But you’ve spied an opportunity to own not just the customer collection but also the business accounts and, more importantly, the multi-currency supplier and expense payments. By adding the extra convenience (and cost-saving FX) you’ve created an even stickier product.
Using fintech infrastructure partners like Airwallex, which allows businesses to embed financial services into their products, makes all this possible.
Let’s dive in a little deeper.
Types of financial services that can be embedded into your stack
Embedded finance allows software companies to improve the customer experience, streamline operations and generate revenue by integrating financial services directly into their tech stack, without having to take on the colossal task of gaining the necessary licences.
Adding wallets, payments to your software are the most common examples of embedded finance. Other types of financial services that can be embedded into your offering include global treasury, debit cards, FX solutions, credit facilities and insurance.
While charging users for these services will generate revenue, the real value is that adding these features to your product makes your offering much more valuable to your customers by as much as 5x. And the greater the perceived value of a product, the more customers are prepared to pay for it.
What type of business would want to embed finance?
The vast capabilities of embedded finance solutions make them an attractive prospect for any ambitious company. Whether your SaaS business is laser-focused on driving growth, or has plans to reach new customers, embedded finance will supercharge your product.
Companies that want to enhance their existing product by adding financial tools or services can also leverage embedded finance. As an example, Airwallex works with wealth management platform Stake to collect customer investments, while providing FX conversion and payout functionality for customer funds.
Widely considered a key component for a successful business strategy, embedded finance boosts internal operational efficiencies, which, in some cases can lead to additional opportunities. TradeBridge has embedded Airwallex technology into their platform to create multi-currency digital wallets for each client, enabling TradeBridge to deliver funds to clients and collect repayments instantly. More importantly, the embedded finance route gives Tradebridge instant visibility of client receivables from one centralised account, meaning they can unlock additional funding for clients based on real-time sales data across multiple eCommerce platforms and currencies.
Finally, companies with aspirations to create entirely different business models can also turn to embedded finance. Super apps like WeChat began life as a simple messaging services. But it was transformed into a feature-rich service offering convenient mobile payment features (among many others) and is now used by over a billion people.
How do I make my product stickier with embedded finance?
Given the added convenience that embedded finance provides, it’s no surprise that this trend has emerged as a key driver for improving the customer experience and increasing user retention.
Products that meet customers’ financial needs in addition to their core offerings create a more seamless customer experience. Streamlining financial processes, it creates added value, and this is especially true in vertical software markets.
Once a user trusts a company enough to handle their financial transactions, they’re more likely to continue using the product. So by adding financial solutions (like the ability to make cross-border payments without international fees) your users no longer need to rely on third-party financial institutions like banks.
This results in a stickier product, therefore reducing customer churn and increasing your revenue. You can learn more about why embedded finance will make your product stickier here.
Build and grow faster with Airwallex’s embedded finance solutions
Airwallex is working with companies across the globe to help them tap new revenue streams through embedded finance. Chat with their team of specialists by booking a demo today.