Embedded Finance

Embedded finance places payments, lending, insurance, or banking inside software that exists for another purpose, so the financial product is offered at the moment of need rather than sought separately.

Distribution is the advantage: the platform already knows the customer, already has their data, and reaches them without acquisition cost.

Revenue comes from payment processing spreads, interest and fees on lending, insurance commissions, and interchange on issued cards.

These lines frequently generate more revenue per customer than the underlying software subscription, and they scale with customer volume rather than seat count.

• Attach rate of financial products among platform customers
• Revenue per customer from financial versus software lines
• Payment volume processed
• Loss rates on any credit extended
• Regulatory capital and compliance cost

Strong embedded finance businesses show high attach rates, underwriting that clearly outperforms generic lenders because of platform data, and a compliance function built before scale rather than after.

The best have financial revenue exceeding software revenue while keeping loss rates below comparable standalone lenders.

• Embedded payments within vertical software
• Working capital lending to platform merchants
• Card issuing and spend management
• Embedded insurance at point of sale
• Banking-as-a-service through licensed partners

• What licences or partnerships underpin the financial products?
• What are loss rates, and how were they modelled?
• Is the balance sheet at risk, or is credit risk passed through?
• What is attach rate among eligible customers?
• How would a recession affect both volume and losses?