What is SaaS Embedded Finance?

SaaS embedded finance is the process of integrating financial services, including payments, lending, or insurance, within a non-financial software platform. Embedded finance enables SaaS and software businesses to provide banking-style services without customers leaving the application. 

Ultimately, this increases user retention and ensures new revenue streams through financial commissions.

Embedded finance can be found in a number of industries, turning software applications into one-stop shops for business management. 

• Embedded Payments: A software application can process payments directly in the app, without the user having to leave.  
• Embedded Lending: SaaS developers can offer customers “Buy Now, Pay Later” (BNPL) option.
• Embedded Insurance: A software business can offer various insurance options during checkout.

SaaS embedded finance carries various benefits, which include: 

End users, on the other hand, gain convenience because they are no longer obligated to switch to a banking portal to complete the payments.

SaaS embedded finance solutions have various revenue streams: 

• Payment processing fees: For each transaction processed, the embedded finance solution takes a percentage. 
• Interest sharing: Gaining an interest portion or origination fees on loans facilitated through the software.   
• SaaS Markup: Embedded finance solutions can charge a premium tier for access to additional services, such as advanced reporting or automated tax tools. 

While often confused, embedded finance represents a different layer in the payment stack than Banking-as-a-Service (BaaS). 

• Banking-as-a-Service (BaaS) is the back-end process in which a licensed bank opens its APIs to a non-bank. 
• Embedded finance is the interface the customer sees when the service is accessed.

While SaaS embedded finance is an option for businesses, it is important to note that compliance requirements must be met to protect their own activity as well as that of their customers. Here are several requirements to consider: 

• KYC/KYB: “Know Your Customer” and “Know Your Business” protocols to verify identities and prevent money laundering.
• PCI-DSS: Security standards for any platform that handles, stores, or transmits credit card information.
• Confidențialitatea datelor: Adherence to GDPR or CCPA regarding the handling of sensitive financial data.
• Lending Licenses: Depending on the jurisdiction, platforms may need specific licenses to offer credit, or they must partner with a licensed bank to “originate” the loans.