Embedded Finance in SaaS: How Payments and Lending Are Turning Software into Revenue Engines

• by Crystal Jedynak
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Most SaaS companies still think of payments as a cost center-something you pay Stripe or PayPal to handle so your users can buy your product. But what if payments weren’t just a feature you outsourced? What if they were the main reason your customers stay, upgrade, and spend more? That’s the reality for companies like Shopify, where embedded finance now drives over 73% of total revenue. This isn’t a fluke. It’s the new playbook for SaaS growth.

What Embedded Finance Really Means (And Why It’s Not Just Another Payment Plugin)

Embedded finance isn’t adding a "Pay with PayPal" button. It’s not even integrating Stripe into your billing page. That’s table stakes now. Embedded finance means your users never leave your app to pay, borrow, or manage money. They get a branded debit card inside your platform. They get a loan approved in under 60 seconds while they’re setting up their invoice. They pay in four installments without ever clicking away from your dashboard.

Think of it like this: Uber doesn’t just connect riders and drivers. It pays drivers, issues debit cards, tracks earnings, and offers instant cash-outs-all inside the app. Lyft does the same. These aren’t side features. They’re core to the business. And they generate billions in interchange fees, interest, and subscription revenue.

Traditional payment processors like Stripe or PayPal act as middlemen. You send users to them. They handle compliance, fraud, and banking licenses. But you don’t own the relationship. With embedded finance, you do. You become the financial partner your customers trust-not just the software they use.

How SaaS Companies Are Making Money Beyond Subscriptions

Monthly SaaS subscriptions are predictable. But they’re also crowded. Competitors can undercut you. Churn is inevitable. Embedded finance changes the game by unlocking three new revenue streams:

1. Transaction fees-Every time a merchant processes a payment through your platform, you take a cut. Shopify earns 2.9% + $0.30 per card transaction, just like Stripe-but now it’s their own money, not a third party’s.
2. Lending interest-Shopify Capital offers merchants cash advances. They repay with a percentage of daily sales. The average APR is 10-15%. That’s pure profit, no customer acquisition cost.
3. Card interchange-When your users use a co-branded debit card (like Lyft’s with Stride Bank), you earn a small fee every time it’s swiped. Gas stations, grocery stores, Amazon-they all pay that fee. And you get a slice.

For a SaaS company with 10,000 active merchants, even a 1% take rate on payments can add $5M+ in annual revenue. Add lending, and that number doubles. That’s not an add-on. That’s a new business.

The Tech Behind It: APIs, SDKs, and Banking-as-a-Service (BaaS)

You don’t need a banking license to offer loans or debit cards. You don’t need to build your own payment rails. You use Banking-as-a-Service (BaaS) providers like Unit, Stripe Treasury, or Bond Financial. These are licensed financial institutions that expose their infrastructure through clean APIs.

Here’s how it works:

• You pick a BaaS partner that handles compliance, KYC, AML, and FDIC insurance.
• You integrate their API to create virtual accounts, issue cards, or approve loans.
• You use an SDK to design the user interface-so it looks and feels like your app.
• Your customer never sees "Stripe" or "Unit." They see your brand, your design, your flow.

Implementation isn’t rocket science. A basic payment integration can go live in weeks. A full lending product might take 3-6 months. But the barrier to entry is lower than ever. In 2025, even small SaaS startups are embedding finance-not because they’re fintechs, but because they’re smart businesses.

Embedded Payments vs. Embedded Lending: Which Should You Start With?

Not all embedded finance is equal. Payments are easier. Lending is more profitable. Here’s how to choose:

If your users are small businesses that invoice clients, start with embedded payments. Let them send invoices with a "Pay Now" button that takes credit cards, ACH, or Apple Pay-all inside your app. You’ll see conversion rates jump. If your users are freelancers or contractors who get paid irregularly, offer instant cash advances. Charge a small fee, but make it feel like a gift. That’s how you lock in loyalty.

Why Users Love It (And When They Get Annoyed)

Sixty percent of UK adults have used embedded financial services during checkout. Why? Because it’s faster. No logging into a bank. No switching tabs. No filling out forms. Just tap, pay, and move on.

But there’s a dark side. When financial terms are hidden, users feel tricked. A merchant might get a $10,000 loan from your platform, only to realize later they’re paying 18% APR-and the repayment is automatically deducted from their daily sales. If you don’t explain this clearly, they’ll leave.

Transparency is non-negotiable. Show the total cost upfront. Use plain language. Don’t bury terms in a PDF. Make the repayment schedule visible in their dashboard. If they can’t understand it, they won’t trust it.

The Hidden Risk: Compliance, Data, and Reputation

When you embed finance, you’re no longer just a tech company. You’re a financial services provider. That means:

• You’re subject to KYC and AML rules-even if your BaaS partner handles the heavy lifting.
• You’re responsible for data security. A breach in your app could expose bank account numbers.
• Your brand is tied to every loan, every declined payment, every disputed transaction.

Choose your BaaS partner wisely. Look for ones with SOC 2 certification, bank-grade encryption, and clear liability agreements. Don’t go with the cheapest API. Go with the one that’s been through audits and has a track record.

Also, don’t overdo it. Don’t embed insurance, crypto, or trading if your users don’t need it. Stick to payments and lending first. Master those. Then expand.

What’s Next? The Future of Embedded Finance in SaaS

The market is exploding. By 2029, embedded finance will generate $385 billion in revenue. That’s not just Shopify and Uber. It’s every SaaS company that serves SMBs, freelancers, or service providers.

Next up: AI-driven lending. Your platform will analyze a user’s transaction history, client payments, and cash flow patterns-and auto-approve a loan before they even ask. No application. No documents. Just a notification: "You qualify for $8,000. Want it?"

Global expansion is coming too. Right now, embedded finance works best in the US, UK, and EU. But in 2026, we’ll see it in India, Brazil, and Southeast Asia-where mobile-first businesses are growing fast and traditional banks are slow.

The winners won’t be the ones with the fanciest tech. They’ll be the ones who understand their users’ money problems-and solve them without making them feel like they’re banking.

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