The rise of embedded finance: Opportunities for ISVs

Recent innovations in the financial services space are opening the door to new opportunities, not just for those in banking and finance, but across other industries as well, specifically among developers. The rise of embedded finance in technology and software has not only revolutionized the way consumers interact with financial tools but has also empowered independent software vendors (ISVs) to own the payment experience within their products and platforms. This integration presents new opportunities for ISVs to boost the value of their software and streamline the end-user’s experience. Consequently, ISVs that have embraced embedded finance early stand to gain a competitive advantage in the market, attracting more users and driving higher engagement.

The rise of embedded finance

Before the advent of embedded finance (meaning the integration of financial tools into non-financial applications and software), financial service providers operated in silos separate from software providers. This disconnect meant customers had to navigate across multiple platforms to fulfill their financial needs. Not only does this lead to a disjointed payment journey, but it means ISVs have no agency over that part of their users’ journey.

Now, thanks to the enablement of embedded finance technology, ISVs can own the payment experience. This technology seamlessly embeds the payment process into everyday software applications, giving end users a more convenient, frictionless experience – and its popularity is growing. According to Forbes, this market is predicted to grow at a compounded rate of 29 percent from 2023 to 2032, leading to a projected value of $730 billion.

How ISVs are leveraging embedded finance platforms and APIs

For developers in all verticals, the rise of embedded finance presents exciting opportunities to take their products and solutions to the next level. ISVs are partnering with providers of embedded finance platforms and APIs, creating a path to unlock new revenue streams and streamline the user experience.

Here's how ISVs can harness the power of embedded finance to upgrade their products and solutions to drive business growth:

1. Integrate seamlessly with APIs

ISVs can leverage embedded finance platforms' APIs to seamlessly integrate a range of financial services into their software solutions. This not only enhances the functionality of their offerings but also gives end users a unified, comprehensive solution within a single platform.

2. Enhance user engagement

Embedded finance is all about meeting the customer where they’re at. The customer benefits from a frictionless solution that meets their financial needs in one place, without them having to switch to another platform. The integration of financial services adds value to the user experience, which in turn leads to increased engagement. Due to the increasing demand from consumers and businesses for a more seamless payment experience, providing a frictionless experience may also lead to increased brand loyalty.

3. Diversify revenue streams

The application of embedded finance can also unlock new revenue streams for ISVs. Instead of relying on traditional methods alone, such as the sale of the software itself, things like transaction fees, subscription models or revenue-sharing agreements with financial service providers provide ISVs with the opportunity to diversify their sources of income.

4. Drive business growth

Not only can this technology create a smoother user journey and diversify revenue streams, but embedded finance has the potential to drive overall business growth for software providers. By offering a more comprehensive solution, ISVs can attract a broader customer base and gain a competitive edge in the market. This, in turn, can lead to increased market share and business expansion.

5. Get an edge in the market

Embedded finance has democratized access to financial services, meaning developers can this technology to innovate and differentiate their products in a crowded marketplace. By offering inimitable financial services or incorporating innovative technologies, ISVs can build unique offerings that stand out against the sea of competition. Additionally, offering financial solutions tailored to the needs of specific industries or user segments allow ISVs to tap into new verticals and expand their customer base.

The impact of embedded finance on the ISV landscape

The rise of embedded finance has led to an influx of newcomers in the software space, and those offering the key to unlocking embedded finance are making it easier to embed these types of components. Developers no longer need to acquire all the necessary skills to integrate financial services into their applications. Instead, providers of embedded financial technologies are supporting ISVs through the integration, helping them to enhance the functionality and value proposition of their software products.

Embedded finance applications represent a transformative shift in the way financial services are delivered and consumed. By embracing embedded finance and leveraging the power of APIs and platforms, ISVs can position themselves at the forefront of innovation in the digital economy, driving value for their customers and stakeholders alike.