In 2023, the Embedded Finance market was valued at $73 billion and projected to grow to $523 billion by 2032, growing at a compound annual rate of 24%, according to a recent report.
This growing market is switching up how small-to-medium-sized businesses (SMBs) access financial products, creating exciting new opportunities for software companies to reimagine their business models and restructure their product offerings. Embedded Finance is the link between customer needs and traditional finance limitations, and we’ve never been more excited for what’s in store for software platforms who choose to offer integrated financial solutions to fuel future growth.
It’s still early days for Embedded Finance, but the preliminary statistics coming out of this space are rather significant.
- 84% of businesses would explore financial products from their business software tool if offered
- 76% are willing to pay a premium for such a one-stop-shop solution across financial products
Embedded Finance is creating new revenue streams for software companies and increasing customer satisfaction. To stay competitive today, software companies should plan to stay on top of the latest Embedded Finance trends and strategies.
Below are the top 3 trends to look out for this year and the benefits they could provide your business.
Embedded Finance trend #1: More complementary embedded solutions
Embedded Payments are the first step for software platforms wanting to integrate financial services. Payments can then act as a launchpad for a variety of complementary solutions such as lending, card issuing, and more. Each brings many benefits like increased transaction volumes for software platforms and stronger growth for their customers. For instance, SMBs with access to working capital may see their Gross Merchandise Value increase by 36% and that creates a virtuous circle of benefits.
Embedded Finance trend #2: Real-time integration, real big opportunity
Business today is fueled by data, and the future will be even more so. Solutions will use insights from user data to craft automated financial services that provide personalized financial assistance in real-time.
Embedded Finance trend #3: Ultra-personal services
We’re not done with data just yet. Software platforms will be digging even deeper into their customer data to offer highly personalized financial products, such as customized loan rates. This data-driven approach ensures that services are relevant, timely, and meet very specific customer needs that enhance the overall user experience.
Embedded Finance and the role of a strategic Embedded Payments partner
Now that you know some of the latest trends in Embedded Finance, how will you implement them?
Aligning yourself with a strategic and knowledgeable Embedded Payments partner that can grow with you and the evolving industry will be key to maximizing and refining the opportunities in front of you.
Ian Hillis, Head of Growth at Worldpay for Platforms, has his finger on the pulse in the world of Embedded Finance and discusses his expertise on an episode of The PayFAQ: Embedded Payments podcast. He highlights how software companies are perfectly positioned to embed financial services into their platform by the nature of their business model as well as their customers reliance and appreciation for their verticalized platforms.
“The relationship between an SMB and the vertical operating system is extremely close and trusted. And that vertical operating system also sits on more data related to the business customer than anyone else in the value chain, including its bank,” shares Ian. “This coupled with the fact that employees and these operators are spending 80-95% of their time within that particular system, means that they’re bestowing a lot of trust to the particular vertical system.”
When you have the trust of your customers, a solid platform, and robust data, Ian believes that SMBs are more likely to engage with products presented to them within their day-to-day workflow. “We’ve watched these vertical operating systems start to offer more products beyond just the core workflow management” and seen early indicators of success.
Stay tuned for more must-know insights into how Embedded Finance is reshaping the financial landscape and driving exciting new growth for software platforms.
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