What All Great Embedded Finance Innovations Have in Common: 3 Core Features

Embedded finance might be yesterday’s favorite buzzword, but that’s only because it’s grown up and into a viable industry in its own right. The formula of taking great products and adding in personalized financial services wasn’t possible just a few years ago, and it’s given way to some runaway successes. Uber popularized the magic experience of walking out of a taxi without paying. Cash App and Chime have redefined what banks can look like. Square and Shopify lend out more capital to small businesses than JP Morgan. The list goes on, but I’ll stop there. 

With the learning curve over the past decade, we’ve seen as many embedded science experiments fall by the wayside, as we’ve seen things hit big, but through it all what’s come into focus is a playbook on what it takes to build great embedded finance products. Three rules stand out. 

Rule number 1: Great embedded finance meets users where they already are

In one form or another, embedded finance goes back decades. Think about the corner store running a tab for a customer in the neighborhood who comes and settles up at the end of the month. The store owner knows and trusts the customer, and is making it seamless for them to shop. 

The technology has got more integrated, but the same concept applies to the more cutting edge tools used by both consumer and business owners today. Embedded finance should be built into the apps and services people are already using, rather than redirecting them elsewhere to complete extra steps. The power lies in contextual, timely, and seamless access to financial tools that fit naturally into the places where people already are. This can look like a lot of things. 

Think of something like Apple Pay, which built a digital wallet into the iPhone, to power essentially one-click payment inside any app or website. Or Cash App building a full suite of bank-like tools around its popular P2P payment service. Or a tool like Boulevard, which salon owners use to manage their businesses, offering working capital inside the platform to small businesses who otherwise might not be able to access it. 

Great embedded finance products have a right to win, because they take a good product and make it better. And because they’re inside the flow of a user’s day-to-day processes, they’re also in the flow of data, which powers rule #2. 

Rule number 2: Great embedded finance is truly personalized 

When you weave well-executed embedded finance tools into trusted user experiences, you unlock access to rich, first-party data, setting the stage for meaningful personalization. It can feel a little bit like magic when it is done well. 

Traditional finance tends toward broad options that drop cohorts of customers into different buckets. Think about getting junk mail “pre-qualified” offers for a loan product because you fall in a certain income range. These offers are no guarantee that you’ll actually be approved, because the data just isn’t there, and getting the data—through credit checks, financial statements, and additional paperwork—can take forever. People have had enough of fumbling in the dark, and they want options that actually work for them, rather than making promises that don’t pay off. 

This personalization can be transformative for an end user, and a business. An ecommerce brand like Target now has the power to provide a loyalty and rewards program where each benefit can be tied to individual consumer behavior. Embedded capital providers can plug into live revenue data in the platforms small businesses use to manage their operations, and give those businesses capital offers tailored specifically to their needs. You’re not in a bucket anymore—now you’re seeing an offer because your actual business activity has been used to pre-approve you.  

This level of personalization has a huge impact on platforms and companies that offer it. Adoption goes up. Products become stickier and customers are more engaged. Everything gets easier, when you make it easier for your customers to get what they need. But easy for customers can be very hard to build.

Rule number 3: Great embedded finance products bring in the right partners

Building financial products is hard. 

Embedded finance might look simple on the surface, but under the hood, it involves complex underwriting, regulatory compliance, risk calibration, and customer experience design. That’s why the best products are built by people who’ve done this before, who know how to model risk, manage capital, and deliver fast, reliable funding without putting partners or users in jeopardy.

Integrating financial services into an existing product can provide a ton of value to end users. But the greatest strength of a product is in its specialization, and the focus, expertise and intensity poured into building a great customer experience. Building financial products in-house distracts from that focus in a way that can be catastrophic. The solution is to partner with someone whose strong suit is connecting businesses to capital through technology. 

The best embedded finance products feel effortless, but only because all the hard work was done up front. Behind the scenes, they reflect years of expertise, deep integration, and a commitment to delivering real value where it matters most: in the moment the user needs it.