Embedded finance industry will become one of the most valuable sectors in fintech reaching $7 trillion globally over the next ten years, according to Finch Capital.
Finch Capital recently collaborated with Stripe on the writing of a report on The Rise of Embedded Finance, which discusses the evolution, current state, and future of the embedded finance market from both a venture investor and a market leader perspective.
Embedded finance is a positive sum trend where banks can serve small businesses at scale, software platforms can diversify their revenue, and small businesses can grow more easily.
„While some of the early embedded finance models (e.g. payments and lending) are starting to mature, we still see significant growth potential in other verticals (e.g. payroll and wealth) and across underserved industries such as health, hospitality and travel,” the authors says.
„Over the last decade we have shifted from disrupting Financial Institutions to embedding the world of finance behind apps and websites, enabling a better and smoother user experience. This has allowed high digital traffic and user players to further monetise and increase stickiness.” – Radboud Vlaar, Managing Partner at Finch Capital.
Top findings include:
VC investments in embedded finance more than doubled from 2020 to 2021 in Europe and North America to reach a total of $6.7B.
The continental European market for embedded finance is finally picking up pace with $1B+ of VC investments in 2021 (and that’s excluding Klarna).
The market is maturing with the increasing share of larger rounds (Series A+) over the years while pre-seed and seed rounds have remained constant.
Industries from healthcare, to retail, to travel and tourism are buying in embeddable financial services to find new revenue streams, deepen customer relationships, and grow valuations
Marketplaces that embed financial services have a median EV/Sales of 6.7x, compared to 5.3x for the ones that do not.
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
