Revenue’s More Important Than Ever. See Where to Find Five Times More on Your Platform.

by | Dec 14, 2023 | Money, SaaS Growth Hacks

Venture capitalist Marc Andreessen famously said in 2011 “Software is Eating the World.” Today, Andreessen’s notorious blog post seems prescient. We’ve adopted software into our work and play so deeply that it’s both ubiquitous and invisible.

More recently, Angela Strange, general partner at Andreessen Horowitz, announced every company will be a fintech company: “Nearly every company will derive a significant portion of its revenue from financial services.”

Embedded finance will make Strange’s prediction reality – first slowly, and then all at once. This technology allows SaaS providers to add features like payment acceptance and business checking accounts to their software, under their brand. Now, Independent Software Vendors (ISVs) and Enterprise Resource Planning (ERP) and e-marketplace software providers can easily expand the solutions they offer their customers, and SaaS companies can unlock new revenue streams.

As more and more business takes place in virtual spaces, traditional financial institutions will move into the background. More than 70 percent of businesses believe more than half of financial services will be offered via nonfinancial services platforms in the near future. Companies building the infrastructure today stand to capture the greater share of what Bain Capital estimates to be a $7 trillion market.[1]

SaaS providers offering embedded finance to their business customers can unlock two to five times more revenue.[2] Offering financial services through a SaaS platform also offers critical soft benefits including:

  • Greater customer reach and loyalty with an enhanced, streamlined customer experience. More than 70 percent of small- and medium-sized businesses prefer an integrated experience.[3] Embedded finance reduces the amount they have to swivel-chair between platforms to manage their business.
  • Increased stickiness by enabling customers to bank on the same platform they run their business. Uber’s latest bid to keep drivers on their platform included embedded checking accounts and cards. They know that people stay where their money is and are building a complete ecosystem for the gig economy.
  • Helping customers centralize business operations. The average small business uses over five different software platforms.[4] Consolidating operations helps SaaS providers deliver a streamlined customer experience.

Dip into the Money Flowing Through Your Platform

SaaS companies reap the benefits of embedded finance by offering more essential services on their platform and under their brand. What financial features do operating businesses need?

  • A way to collect money from their customers. Payment acceptance allows businesses to invoice and collect money from their customers and are table stakes for embedded finance. As many as 89 percent of software companies already offer integrated payments through their platform.[5]
  • A place to keep the revenue they earn. The median small business holds an average daily cash balance of $12,100.[6] A staggering number of these small business owners use their personal checking accounts out of habit or because opening a business checking account feels like a hassle. Bain Capital projects that companies offering embedded accounts and cards will tap into an $12 billon market in the next few years.[1]
  • A reliable path to track payments to vendors. Many businesses pay their vendors and employees with physical checks, even at a time when their younger employees have never written a check in their lives. Automated accounts payable and accounts receivable (AP/AR) offer platforms a $6.7 billion opportunity.[1]

Six Steps for Embedded Finance Success

Implementing embedded finance solutions within a SaaS ecosystem demands careful planning and execution. To minimize complexities, consider these six steps to incorporate embedded finance:

  • Determine your readiness for embedded finance. Consider your platform’s stability and the size of your subscriber base. Evaluate your technology stack and assess how well it can manage more users on your platform for longer.
  • Know your customer. SaaS providers can help make new features, processes, and technologies more accessible to their customers. Define what financial services will interest them most as they use your platform — payment acceptance, lending, and business checking accounts.
  • Partner with an expert in financial services. Integrating banking-as-a-service solutions on your platform requires protecting sensitive financial data and ensuring regulatory compliance. Embedded finance partners must ensure they understand and comply with all applicable laws and regulations.
  • Prioritize easy integration. Look for a partner with deep financial and technology expertise, with a wide range of APIs and developer tools. Using APIs can be a cost savings. Having a partner invested in your success to lead you through the integration changes the game.
  • Simplify the onboarding process. Simplifying enrollment reduces your administrative burden and ensures a hassle-free experience for your customers. A superior embedded finance partner may even take on the onboarding experience altogether to ensure a seamless experience for your customers.
  • Highlight the benefits of your ecosystem. Revenue generated via payment processing allows businesses to capture more of the money stream. Payments are automatically deposited into the business owner’s digital bank account, eliminating the need for manual transfers, and ensuring that funds stay on the SaaS provider’s platform. Linking payments and bank deposits simplifies financial management and transactions for business owners, offering them convenient access to their funds.

A Case Study for Platforms and Businesses

Consider a music store: an extremely sophisticated small business. A music store is a retail sales operation, with inventory and perhaps even small financing. The store also offers music lessons, which need to be scheduled (for both the student and the teacher) and provides regular monthly billing. The store may also perform music repairs, which requires tracking additional payroll (did you know a violin maker is called a luthier?) as well as tracking when and where the instrument is in the repair process.

A great music store operating system incorporates all these needs with a user experience that an artist can understand. The promise of embedded finance is also to provide a seamless financial experience that supports the music store in collecting at the point-of-sale, recurring revenue, and payroll.

It’s possible. In fact, it’s never been easier.

About the author

Ernie Moran is Chief Revenue Officer at Maast 

[1] Harris et al. “Embedded Finance: What It Takes to Prosper in the New Value Chain.” Bain Capital and Bain & Company. 2022.

[2] Source: Shen, Kristina et al. “Fintech Scales Vertical SaaS.” Andreessen Horowitz. 8/4/20.

[3] Source: AiteNovarica. “Delivering the Experience Small Businesses Expect.” 2021.

[4] Source: Intuit QuickBooks Small Business Index Annual Report 2023.

[5] Source: 2023 Software Study Report. TSG/RSPA. July 2023.

[6] Source: “Cash is King: Flows, Balances, and Buffer Days.” JPMorgan Chase & Co. 2023.

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