mmob: How to increase your revenue with embedded finance
11th May 2022
Author: Phoebe Singer, mmob
How do companies actually make money through embedded finance, and why should you be interested?
The bottom line isn’t everything, but it is important. Many businesses have experienced difficulty the past few years with the coronavirus pandemic and rising inflation, in addition to the other traditional difficulties which come with running a business. As the market returns to a ‘new normal’, we believe that this year will see companies increasingly looking to embedded finance to drive revenue.
The embedded finance industry is currently valued at $43 billion and estimated to jump to $138 billion in 2026 and $7.2 trillion by 2030. Who wouldn’t want a slice of that? Leveraging embedded finance can deliver incremental revenue for companies and verticals across the financial services industry and in non-financial services alike. If your business does not currently have an embedded finance strategy, 2022 is the year to make one.
For those embedding products
Every digital entity is linked to financial services in some way, whether in the form of payment transactions, insurance, loans or another financial product. In an increasingly competitive digitised arena, where customer delight and frictionless user journeys can make all the difference, embedded financial tools can boost retention and conversion within your customer funnel.
Even better, the addition of services that convenience users, particularly in unexpected ways, have great benefits for companies. For example, consumers were not demanding the services of BNPL as it was accepted that purchases are paid in full at checkout. The success of BNPL comes from the simplicity of offering users a convenient alternative to the norm.
So, how do companies make revenue from embedding additional financial products? It depends on the agreement between the partners but there is often a commission-based stream. If an insurance provider gains users through a partnership with a motor company, the motor company will gain commission for each user. There is also evidence of higher consumer spending with the convenience of embedded financial services; users spend around 1.7x more with a seamless checkout process. 87.5% of businesses saw improved engagement and 85% attracted new customers as a result of embedding financial products, according to Accenture and Plaid’s report. The many benefits of embedded finance, such as commission, engagement and customer satisfaction, help companies gain additional revenue.
For those with products to embed
Embedded finance also opens new revenue streams for companies within financial services wanting to embed their own products elsewhere. There is an infinite number of channels for products to be integrated into, allowing businesses to rapidly place products in front of new user bases. Channels bringing in new users lead to dramatic increases in revenue; for example, mmob partner ecosystem member iwoca found 30% of loans they issued are currently brokered through embedded finance channels, demonstrating the success of the new channels available within embedded finance. As a financial services provider, embedded finance is a simple way to dramatically increase distribution channels, user bases and therefore revenue streams.
Embedded finance is accessible for any business, whether within the financial services industry or not. Revenue growth is just the tip of the iceberg, and embedded finance is the way to do it in 2022.