The next steps for B2B embedded finance – A $55 billion market

B2B SaaS product managers are now forced to look for ways to create more value for their customers, in order to increase retention and ARPU (average revenue per user).

While some may assume commercial growth and revenue metrics belong in the sales team or finance team, new research shows that product teams are not disconnected from these KPIs. Quite the opposite.

And the connection is growing cross-functionally as these metrics become more front and centre for all.

According to the research The next step for B2B SaaS, practically all B2B product managers are tracking commercial KPIs, mindful of growth and revenue.

They’re possibly feeling pressure to add quantitative value in a B2B SaaS industry that’s no longer quite as flush with investor cash as it used to be.

Past innovations such as complementary mobile app access and consumer-grade UX have largely been played out, so newer options are being explored.

One of these options, embedded finance, looks prime for the mainstream.

Prime for the mainstream

According to McKinsey’s 2022 market-sizing model, they deemed it to be worth $20 billion in revenues for the US alone.

In the same year, Bain & Company predicted by 2026 the embedded finance market would double from $22 billion to $55 billion, and B2B embedded payment revenues would nearly quadruple from $1.9 billion to $6.7 billion.

And after years in adolescence, it’s finally become a technology that product managers can rely on for critical ROI.

Embedded finance isn’t the only option open to product managers right now.

The possibilities also inevitably include AI – whether that’s machine learning, predictive AI, or GenAI – and the ability of SaaS businesses to monetise this value are still at an experimental stage in most scenarios – as embedded finance has also been until recently.

B2B SaaS platforms may have held off on embedded finance in the past because it appeared too complex, too untested, too out of reach to implement, and in some instances embedded finance has been these things – especially when we look at the first-wave of BaaS providers and adopters.

This confusion hasn’t been limited to SaaS providers, either.

When Weavr surveyed UK banking executives in 2023, almost every respondent (99%) identified at least one area of uncertainty that was holding them back from implementing embedded finance.

This picture has now changed, especially for B2B SaaS providers.

The current rate of adoption suggests it is entering the mainstream. You could say embedded finance is coming out of adolescence, and the research shows that the industry recognises this change.

“New approaches to embedded finance are now coming to the market. The compliance burden, while fully acknowledged, is now less of a barrier for SaaS businesses,” says Alex Mifsud, Co-founder and CEO of Weavr.

“The earliest examples of B2B digital businesses using embedded finance (beyond payment acceptance, with services that require onboarding) were marketplaces that needed payments infrastructure that was more complex than just accepting e-payments.

Stripe Connect, one of the first solutions in the market to cater for this, was an early beneficiary of this trend. BaaS then offered a more ‘a la carte’ way of building solutions, which promised greater flexibility and better unit economics.

However, the compliance burden – which was initially poorly defined and largely considered to be manageable – progressively became both better defined and more burdensome.

Fintechs simply accepted this development as part of the cost of being in the business they wanted to be but, for SaaS businesses, the barrier to adoption of embedded finance got progressively higher, taking it beyond their appetite.

New approaches to embedded finance are now coming to the market to address this barrier.

With these more mature, more comprehensive embedded finance solutions, the compliance burden, while fully acknowledged, is now less of a barrier for SaaS businesses.

The next generation providers of embedded finance solutions already largely cater for it.”


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