Embedded finance has moved from a fintech trend to a core product strategy for startups building platforms, marketplaces, and SaaS businesses. As customer expectations evolve, users increasingly expect to pay, get paid, manage balances, and access financial services directly inside the products they already use. For startups, this shift is not just about convenience – it has direct implications for conversion, retention, revenue growth, and operational scale.
The market data reflects this shift clearly. According to Grand View Research, the global embedded finance market was valued at $83.3 billion in 2023 and is expected to grow to $588.5 billion by 2030, representing a compound annual growth rate of over 32%. Bain & Company projects that embedded finance transaction volumes could rise from $2.6 trillion in 2021 to $7 trillion by 2026.
What “embedded finance” means in a startup context
For startups, embedded finance refers to the integration of financial services directly into a non-financial product experience. Rather than redirecting users to external payment pages, banks, or third-party portals, startups enable financial actions to happen natively within their platform. This can include accepting payments, issuing payouts, holding balances, offering virtual or physical cards, managing foreign exchange, or providing access to credit once it’s needed.
The defining characteristic is not the technology itself, but the user experience. When financial interactions feel like a natural extension of the product, friction is reduced and engagement increases. In practice, embedded finance turns payments and money movement into product features rather than external dependencies.
McKinsey put it simply: embedded finance works because it creates an integrated experience customers actually prefer – that’s exactly what helped it reach $20B in US revenues in 2021.
Why embedded finance matters for early-stage and scaling startups
Startups operate under different constraints than large enterprises. They need to acquire users efficiently, convert demand quickly, and manage cash flow carefully. Embedded finance addresses all three.
From a conversion perspective, payment friction remains one of the largest sources of revenue leakage. Industry research consistently shows average online cart abandonment rates of around 70%, with a significant share of users abandoning transactions because the checkout experience is too complex or their preferred payment method is unavailable. When startups embed payments directly into their product and support locally relevant payment methods, they reduce drop-off at the most critical moment in the user journey.
Retention is the second major driver. When a startup becomes the place where users receive money, pay suppliers, or manage balances, the product moves closer to the customer’s operational core. Switching providers no longer means just changing software – it means rebuilding financial workflows. This creates natural stickiness that is difficult to replicate through features alone.
Finally, embedded finance opens new monetization opportunities. Instead of relying solely on subscriptions or usage fees, startups can participate in transaction-based revenue streams, foreign exchange margins, value-added payment services, or financing products. Importantly, these revenues tend to scale with customer activity, aligning the startup’s success with the success of its users.
What startups need to launch embedded finance successfully
Even though embedded finance brings clear benefits, it’s not something you can launch by simply plugging in an API and moving on. Startups that succeed treat it as part of the product, not just a technical add-on.
First, the user experience needs to be clear and easy to understand. Customers should always know when money is taken, when it will arrive, and what happens if something goes wrong. Showing payment statuses, transaction history, and clear refund or payout timelines helps users feel confident and trust the product.
Next, the way payments are handled matters a lot. Cards alone are often not enough, especially in countries where people prefer bank transfers, instant payments, or digital wallets. Startups that support the payment methods users already trust see fewer failed payments and fewer support requests. The same applies to payouts – fast and reliable payouts make a big difference to user satisfaction.
As the business grows, operations become just as important. Startups need to track where money is going, match payments to customers, handle fees and chargebacks, and produce accurate reports. These problems usually appear sooner than expected, and building with visibility and control from the start helps avoid painful fixes later.
Finally, security and compliance can’t be ignored. Even if a partner handles licensing, the startup is still responsible for protecting users. This means verifying identities, preventing fraud, following sanctions rules, and keeping data secure. Getting this right early makes it much easier to scale into new markets and launch new financial features.
Build versus partner: a strategic choice
For most startups, partnering with an embedded finance provider is the fastest and safest way to launch. Building financial infrastructure in-house requires deep regulatory expertise, significant capital, and long timelines. By contrast, partnering allows startups to focus on product differentiation while relying on specialized providers for compliance, connectivity, and operational resilience.
Over time, some startups may choose to internalize specific components where it creates a defensible advantage. However, this decision is typically made after achieving scale, not at the earliest stages.
Embedded finance as a growth lever, not just a payment feature
The most successful startups do not view embedded finance as a cost center or a technical necessity. They see it as a lever for growth, retention, and differentiation. By removing friction at critical moments, aligning monetization with customer success, and embedding trust into the product experience, financial services become a driver of competitive advantage rather than an afterthought.
For startups building platforms where money flows between users, businesses, or borders, embedded finance is increasingly not a “nice to have.” It is becoming a foundational capability – one that determines how efficiently a company can scale, how well it can serve its customers, and how resilient its business model will be over time.
