The Embedded Banking Hub
Instead of sending the customer to a bank, brands can offer their own banking products, embedded in their non-financial core product. But how does that work, why are they doing it, and what should builders know before getting into it? This hub sets out to answer those questions and support builders on the way.
What it is
Plenty of things get labelled embedded banking these days. We look at it from two angles:
Embedded
A non-financial brand offers the financial product as part of its own offering. The brand owns the product and the customer relationship. The account or card appears inside the platform the customer already uses, it is set up on data the platform already holds, and the customer never leaves to open it somewhere else. If any of that is missing, it is distribution, not embedded finance.
Banking
Accounts and balances held in the customer's name, debit and spend cards, payouts and instant access to earnings, expense and treasury tooling built on top. Money sits somewhere and can be spent from there. B2B and B2C both count.
Why they offer it
There are four major reasons to launch an Embedded Banking offering. Most of the public data is based on embedded finance generally, however, this aligns with what we see in the market for Embedded Banking as well.
Valuation
Public and private markets pay more for software companies that also offer financial products.
More
Acquirers pay more for companies with an embedded finance offering. The independent investment banking firm William Blair, looked at around 100 of its own transactions with private North American software companies. They found platforms with embedded finance valued at a 23% premium on revenue multiples and 19% on EBITDA multiples against software-only peers. The gap widens for platforms running more than one financial product: 12.7x EV/revenue against 8.4x for software only, and only around one in ten companies in the sample were there. (William Blair)
Growth
Customers who can finance stock buy more stock, and embedded channels are taking share from direct distribution.
More
Customers who can finance stock buy more stock, and customers who can finance a job take on bigger jobs. McKinsey puts the effect on the merchant side as higher conversion, larger baskets and higher lifetime value. In Europe the volume shift is already visible: embedded finance volumes grew three times as fast as directly distributed loans over the last ten years, and embedded channels could account for 20 to 25% of retail and SME lending, up from 5 to 10% today. (McKinsey)
Retention
A business with an outstanding advance running through your platform has a reason to stay that a feature release cannot buy.
More
William Blair found gross revenue retention of 89% among customers using the software alone, against 95% among customers who also use the embedded financial products. At platform level the same pattern holds: gross retention of 93% against 95%, net revenue retention of 105% against 111%. (William Blair)
Revenue
The revenue pool is large, growing, and mostly unaddressed.
More
Bain forecast revenue for software platforms and the providers powering them to more than double from $21bn in 2021 to $51bn in 2026 in the US. McKinsey has the European market at €20bn to €30bn in 2023, around 3% of total banking revenues, heading past €100bn by the end of the decade. BCG, in research published with Adyen, sizes the addressable opportunity for SaaS platforms at $185bn with less than 20% of it addressed so far. (Bain · McKinsey · BCG and Adyen)
Why their customers use it
The money arrives sooner
Earnings that would sit in a payout cycle for days are available as soon as the work is done, because the platform already knows the job is finished and who is owed. For a driver or a venue running on thin working capital, that timing matters more than the rate on the account.
Opening it is not a project
The platform already holds the identity, the trading history and the tax details, so onboarding is a confirmation rather than an application. A business that would spend weeks opening a commercial account elsewhere is set up in the tool it already logged into.
Balances sit next to the work
Card spend, balances and payouts appear alongside the orders, shifts and invoices that produced them. There is no exporting, no matching statements against jobs, and no second system to reconcile at the end of the month.
Built for how they actually work
A generic business account treats a freelancer, a restaurant and a driver as the same customer. A platform that only serves one of them can shape the account around that trade: the categories, the limits and the tax handling that trade needs.
How it looks in practice
Three companies can serve as (random) examples of why they have launched banking and how it benefits their business.
Business software suite
The business software suite launched an expense card with Stripe and Mastercard, aimed at its 15 million users across more than 175 countries.
Read the story
Tax app for freelancers
The German tax app built its own banking product with Swan, after open banking under PSD2 failed to give its users a smooth experience.
Listen to the episode
Global marketplace
UK drivers get the Uber Pro Card with instant payouts, fuel cashback and a linked account, built on Griffin's banking platform with Mastercard.
Read the storyLatest banking coverage
Everything we published on embedded banking, with the most recent pieces first.
Latest stories
Expensify launches its card in Europe, with Marqeta as both processor and issuer Samsung launches the Galaxy Card with Barclays, a co-branded card that does not go as far as the Apple Card How Squarespace Built a Financial Stack for Its Merchants How Fortnox Built Its Embedded Finance Stack Dutch neobank bunq launches banking-as-a-service on its own bank licence See all banking coverageThinking about embedded banking?
Request your 30 minute slot with me to talk about your embedded banking plans. Free, no commitments, and everything we discuss stays between us.
Book office hoursEmbedded finance in Europe, every week. Around 2,500 people in the industry read it.