In 2021, Mindbody, a SaaS platform used by 60,000 fitness studios and wellness businesses, launched Mindbody Capital. The product offered cash advances to gym owners based on their booking and payment data flowing through Mindbody’s platform. A studio generating $30,000 per month in class bookings could receive a $15,000 advance within 48 hours, repaid automatically through a percentage of future transactions. Mindbody was not a bank. It was a scheduling and payments platform that discovered its transaction data made it a better lender than most banks could be for that specific customer segment. This pattern, software platforms embedding financial products into their core offering, is reshaping how businesses access financial services. The global embedded finance market was valued at $83.32 billion in 2023 and is projected to reach $588.49 billion by 2030, growing at 32.8% annually, according to Grand View Research.
Why Software Platforms Are Becoming Financial Service Providers
The logic is straightforward. A SaaS platform that manages a business’s operations, whether that is point-of-sale for a restaurant (Toast), fleet management for a trucking company (KeepTruckin, now Motive), or project management for a construction firm (Procore), has real-time visibility into that business’s financial health. It can see revenue trends, seasonal patterns, customer concentration, and payment reliability. A traditional bank reviewing the same business sees quarterly financial statements, often submitted months after the fact, and a credit score that says nothing about operational performance.
This data advantage translates into better underwriting. Shopify Capital, which has disbursed over $5 billion to merchants since its 2016 launch, reports loss rates significantly below traditional small business lending. The reason is simple: Shopify knows a merchant’s daily sales, refund rate, and growth trajectory in real time. If a merchant’s revenue drops, Shopify adjusts the repayment schedule automatically because repayment is a percentage of daily sales, not a fixed monthly amount.
The Boston Consulting Group projects fintech revenues will reach $1.5 trillion by 2030, with embedded finance and digital lending accounting for the largest share of projected growth.
According to CB Insights’ 2024 fintech report, global fintech funding declined 40 percent between 2022 and 2024, pushing the sector toward consolidation and a sharper focus on profitability over growth at all costs.
Toast, the restaurant management platform, generates a more instructive example. In 2023, Toast reported that over 80% of its gross profit came from financial services, not from its software subscriptions. Payment processing, capital advances, and payroll services built on top of its restaurant management platform now produce more revenue than the platform itself. The software became the distribution channel. The financial services became the business.
The Economics of Embedded Finance for Platforms
Embedded finance changes the economics of SaaS businesses in three measurable ways.
First, it increases revenue per customer. A SaaS platform charging $100 per month for software earns $1,200 per year from a customer. That same platform, processing the customer’s payments (taking 2.5% of $500,000 in annual volume), offering a capital advance (earning a 12% fee on a $50,000 advance), and providing business insurance (earning a 20% commission on a $3,000 annual premium), earns an additional $19,100 per year. The financial services revenue is 15 times the software subscription.
Second, it reduces churn. A customer using a platform for software alone can switch to a competitor by migrating data. A customer using the platform for payments, lending, banking, and insurance faces switching costs across multiple financial relationships. Shopify merchants using Shopify Capital, Shopify Payments, and Shopify Balance are significantly less likely to migrate to WooCommerce or BigCommerce than merchants using only the base e-commerce platform.
Third, it creates a data flywheel. Every financial transaction processed through the platform generates data that improves underwriting, pricing, and fraud detection. More data means better financial products. Better financial products attract more customers. More customers generate more data. This cycle is difficult for competitors to replicate because the data advantage compounds over time.
| Revenue Source | Annual Revenue per Customer | Margin | Switching Cost |
|---|---|---|---|
| SaaS Subscription | $1,200 | 75-85% | Low (data migration) |
| Payment Processing (2.5% on $500K) | $12,500 | 20-30% | Medium (integration) |
| Capital Advances (12% fee on $50K) | $6,000 | 40-60% | High (credit relationship) |
| Insurance (20% on $3K premium) | $600 | 80-90% | Low (annual renewal) |
Source: Author analysis based on published company reports and Grand View Research market data
The Infrastructure Enabling Platform Finance
Software platforms do not build banking infrastructure internally. They use Banking-as-a-Service (BaaS) providers that supply regulated financial capabilities through APIs.
The BaaS market has matured rapidly since 2020. Unit, founded in 2019, provides APIs for checking accounts, debit cards, and lending that platforms can integrate in weeks. Treasury Prime connects platforms to a network of partner banks, each offering different capabilities. Column, which obtained its own bank charter, eliminates the middleware layer entirely by offering banking APIs directly from a licensed institution.
For payment processing, Stripe Connect and Adyen for Platforms let marketplaces and SaaS companies manage payments on behalf of their customers while taking a cut of each transaction. These tools handle regulatory complexity (Know Your Customer verification, sanctions screening, tax reporting) that would take a platform years to build independently.
The result is that the time to launch an embedded financial product has collapsed. In 2018, a SaaS company that wanted to offer business banking to its customers would have spent 12 to 18 months negotiating with a bank, building compliance infrastructure, and obtaining regulatory approvals. In 2025, the same company can integrate with a BaaS provider’s API and have a working product in 8 to 12 weeks. That speed reduction is one of the primary reasons embedded finance adoption is accelerating.
Which Platform Categories Are Moving Fastest
Not all software categories are equally suited to embedded finance. The platforms with the strongest position share three characteristics: they process transactions (giving them payment data), they serve businesses (creating lending opportunities), and they are the system of record for their customers’ operations (making them hard to replace).
Restaurant and food service platforms lead in adoption. Toast processes over $100 billion in annualized payment volume and uses that data to offer capital advances and payroll services. Square (Block) does the same for small retailers and service businesses, having originated over $17 billion in loans through Square Loans since 2014.
E-commerce platforms are close behind. Shopify’s financial services (Shopify Payments, Shopify Capital, Shopify Balance) now account for a larger share of gross profit than its subscription revenue. Amazon Lending has extended over $5 billion in loans to marketplace sellers since 2011, using sales data to underwrite credit that traditional banks would not offer to most of these businesses.
Vertical SaaS companies are the emerging category. ServiceTitan (home services), Procore (construction), and Jobber (field services) are all integrating payment processing and lending into their platforms. These companies have deep domain expertise and strong customer relationships, making their embedded finance products more targeted than horizontal offerings.
The pattern across all categories is consistent. Financial services revenue grows faster than software revenue, generates higher absolute dollars per customer, and creates stronger retention. For platform investors, the embedded finance capability is increasingly the primary valuation driver, not the software itself.
Risks and Regulatory Pressure
The growth of embedded finance has attracted regulatory attention. The Synapse bankruptcy in April 2024 exposed a structural risk in the BaaS model. Synapse, a middleware company connecting fintech platforms to partner banks, filed for Chapter 11 and temporarily froze access to customer funds held at Evolve Bank and Trust. Thousands of end users could not access their money for weeks. The incident demonstrated what happens when the company holding the customer relationship (the fintech platform) is different from the company holding the money (the bank), with a technology intermediary in between.
The Office of the Comptroller of the Currency responded with enhanced examination procedures for banks engaged in BaaS partnerships. The Federal Reserve issued guidance requiring banks to maintain direct oversight of fintech activities conducted under their charter. These regulatory actions increase compliance costs for both banks and platforms, potentially slowing the pace of new embedded finance launches.
For platforms, the risk is reputational as much as financial. When a Toast merchant cannot access a capital advance because the BaaS provider has a compliance issue, the merchant blames Toast, not the underlying bank. Platforms that embed financial services take on customer service responsibilities for products they do not fully control. Managing this risk requires careful partner selection and contingency planning.
The $588 billion embedded finance market projected for 2030 will be built by platforms that understand a specific insight: the best financial product is the one that appears at the exact moment a business needs it, inside the tool that business already uses every day. The platforms that get this right will capture financial services revenue that banks never knew they were losing.
