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Most software companies shouldn’t build a capital product. Here's why:

Connect with Luke on LinkedIn to keep the conversation going.

Luke Voiles

Convenience has now become table stakes. 

In the past few years, especially since the onset of COVID, we’ve come to expect that what we need can be dropped on our doorstep with the click of a button. Those expectations go beyond our personal lives and carry over into how we run businesses, which is why embedded financing is growing so fast. 

For independent software vendors (ISVs), offering capital to their customers can be a powerful step up in the relationship. Putting capital in their hands when they need it helps ensure SMBs stay healthy and operating, and giving them access to that capital through your software platform increases stickiness and loyalty by letting them get everything they need in one place.

Small business owners want quick access to capital where they already spend time, in the software they use to run their business day to day. Add to that increasingly difficult access to traditional financing, and there’s an enormous opportunity for software companies. But in addition to the opportunity, it also presents a big challenge.

The challenge of building embedded capital

To put it simply, building a capital product is incredibly hard. There are a lot of moving parts and hurdles you have to clear to make it sustainable. When you really break it down, there are five crucial requirements:

The trouble is, access to capital hinges on the successful execution of the previous four requirements. The increasing verticalization of software gives an advantage in two of these areas, but can software companies overcome the others? 

And when it comes to building in-house, should they even try?

The verticalization of payments and industry-specific software 

The verticalization of payments has been an ongoing trend, with comprehensive software tools that help business owners manage their operations seamlessly. This trend will only continue, leading to more end-to-end operating systems that simplify business management and payment processing. A prime example is Toast, a widely recognized platform that helps restaurateurs oversee just about everything.

Industry-specific software holds unique, accurate, real-time transaction data, which can be a solid foundation for a capital offering. It also provides a steady funnel of new customers, already engaged with the software and using it regularly. However, while vertical software can address the first two requirements of low CAC and consistent data, it falls short in underwriting expertise, operational efficiency, which limits access to external capital. 

These are formidable challenges that even many pure-play lenders struggle with, especially during tough economic cycles. Having had the opportunity to play a significant role in the growth of both QuickBooks Capital and Square Banking, I can say two things for sure: these are high hurdles to jump, even for companies with massive resources available to them, and they’re the kind of problems that Fintech was born to solve.

Integrating financial services within industry-specific software can provide a ton of value to business owners. But the greatest strength of these software companies lies in their specialization. They intensely focus on and understand their industry, and building a capital product in-house distracts from that focus in a way that would be catastrophic. The solution is to partner with someone whose strong suit is connecting businesses to capital through technology. 

Fintech has a significant role to play in making financing more accessible to small business owners, and embedded financial services make perfect sense. With domain expertise across finance and technology, the right Fintech partner can automate the underwriting process, getting accurate results from live data with as little as 3-6 months of history, whereas banks traditionally need two years of audited financials and tax returns. 

Along with operating efficiency and tech-driven underwriting, they can also build compliance and regulatory tools into their embedded offerings, creating a turnkey solution. This allows software companies to leverage their deep industry knowledge and data through an embedded solution as simple as an off-the-shelf product.   

At Pipe, we’ve built an embedded product, 

, that does exactly that. Vertical SaaS companies and payment processors can deliver a fast, frictionless capital experience to their customers, with a native look and feel, without building anything from scratch. Multiple integration options let them decide exactly how hands-on they want to be with the process, based on resources and priorities, and they can launch capital to their customers in as little as a few weeks. 

The rise of embedded finance presents an exciting opportunity for software companies to expand their offerings and empower small businesses. However, it's crucial to recognize the challenges inherent in building a sustainable capital product. Careful consideration, expertise, and strategic partnerships are essential for success in embedded finance. Vertical software solutions and Fintech can work together to create massive value and give small businesses a new level of financial access.

Building a capital product is no small task. Here are three reasons most software companies shouldn't even try.

Building an embedded capital product is no small task. Here are three reasons most software companies shouldn't even try.

Here's why most software companies shouldn’t build an embedded capital product. 

Here's why most software companies shouldn’t build a capital product. 

Pre-Approved vs. Pre-Qualified: What’s the difference and which is best for your embedded finance product?

Connect with Manpreet on LinkedIn to keep the conversation going.

Manpreet Dhot

Embedded finance can unlock tremendous potential for software companies, enabling them to provide value-added services that deepen customer engagement and create new revenue streams. By leveraging live data, financing offers can be generated automatically, making funds available for your small business customers without the need for extensive applications and waiting periods. However, not all embedded lending solutions are created equal—especially when it comes to funding offers labeled as “pre-approved” versus “pre-qualified.” For software companies, understanding the difference is essential to ensuring your platform delivers the best customer experience while maximizing the potential benefits for your business.

Pre-qualified vs. Pre-approved: The key differences for embedded finance

One of the defining differences between pre-qualified and pre-approved is the percentage of offers that go on to be fully approved. To be considered pre-approved, offers need to be much more finalized

the only issues that should lead to a disqualification should be failed fraud or compliance checks. 

As you can see, providers with pre-approved offers may require a bit more data up front (though this should be behind the scenes and seamless from a customer perspective) but leads to less customer disappointment and more final offers. By utilizing more up-front data, offers can be stronger and more customized, based on a better understanding of business health.

Pre-approved funding allows SMBs to access capital quickly, which is crucial for responding to opportunities or addressing urgent needs. By significantly reducing friction in the application process, pre-approval ensures businesses spend less time waiting and more time growing.

A pre-approved offer signals that a platform has already vetted the business and determined its eligibility. This gives SMBs the confidence to move forward without worrying about unexpected denials or changes to terms.

Consider a small e-commerce business that needs to restock inventory after an unexpected surge in demand. With pre-approved funding, they can act immediately, ensuring they don’t lose out on sales opportunities. Pre-approved offers enable SMBs to navigate challenges and seize opportunities without financial uncertainty. It also gives them confidence that their offer will hold up, reducing the need to apply for funding from a competitor while waiting for final approval.

Why pre-approval is a competitive advantage for software companies

, with a unique underwriting approach that allows us to create pre-approved offers for our partners’ customers without relying on credit checks. Our reliable, unbiased offers result in outstanding customer satisfaction scores with an average NPS of 77. 

Pre-approved funding is more than a convenience—it’s a strategic advantage for software companies embracing embedded finance. For SMBs, it means faster, more reliable access to the capital they need to thrive. For software platforms, it translates to higher engagement, stronger revenue opportunities, and a significant edge in a competitive market.

If you’re considering adding embedded capital to your platform, make pre-approved funding a priority. It’s a win-win for your customers and your business.

Compare pre-qualified and pre-approved financing offers and decide which one is better for your embedded capital product

Whether you're looking for working capital for your business, or selecting an embedded financing partner for your software platform, make sure you know the difference between pre-qualified and pre-approved offers.

What's the difference between pre-approved and pre-qualified business financing?

Expanding access to capital for women-owned businesses

Pipe

 in Atlanta in 2022, with her co-founder, 

Zanbria Asante. Like many woman-owned businesses, Swella is more than a source of revenue, it’s a powerful way to give back to the community—in this case, delivering luxury hair braiding services at an affordable price. 

nearly 40% of all U.S. businesses are woman-owned

—around 14 million—the numbers have consistently shown that women struggle to access working capital at the same rate as men (more on that in a minute). 

With the power of female business owners to drive economies, impact communities, and create jobs, access to unbiased capital is crucial.   

The economic power of women-owned businesses

Women-owned businesses aren’t just a growing segment of the economy—they are a driving force behind job creation, innovation, and community development. Across industries, female founders are building businesses that serve essential needs, create employment opportunities, and reinvest in their local economies.

This reinvestment creates a multiplier effect, benefiting education, healthcare, and local businesses. When women-owned businesses thrive, entire communities prosper. But for many female founders, accessing the capital needed to start, sustain, and scale a business remains a major hurdle.

The funding gap: challenges facing female entrepreneurs

Despite their economic contributions, women entrepreneurs continue to face significant barriers when it comes to securing funding. The playing field is far from even.

Take Brooke Hill, for example. Before launching Swella, she spent 

—credentials that should make any investor take notice. Yet, like many female founders, she found that access to capital wasn’t just about experience or expertise. The reality is that 

many traditional financing models weren’t built with women-owned businesses in mind

, which can disproportionately disadvantage women due to historical factors like wage gaps, caregiving responsibilities, and systemic biases in credit assessment. On top of that, 

women-owned businesses tend to be asset-light and cash flow-based

, which often require significant collateral.

This funding gap doesn’t just hold individual entrepreneurs back—it limits economic growth, job creation, and innovation. Expanding access to 

 isn’t just about fairness; it’s about unlocking the full potential of women-led businesses.

How Pipe is helping level the playing field

Overcoming these challenges is no small task. You may be asking, “What can we do to expand capital access for women-owned businesses?” We believe it starts with new models and evolved, unbiased approaches to underwriting that minimize or eliminate dependence on credit scores and better account for differences in business model and size.    

At Pipe, this starts with underwriting small businesses and providing offers (typically pre-approved) based on real-time transaction data. This eliminates reliance on credit scores and more accurately reflects the potential of smaller, asset-light businesses. We also require no collateral or personal guarantees, both of which shift risk onto small business owners and are often a barrier to capital access. 

The impact on woman-owned businesses like Swella can be significant: 

“As a small business owner, the weight can be heavy in securing the financial means to launch a retail space,” says Brooke. “Often, traditional loans want a personal guarantee, which is not founder-friendly. [Pipe] was able to see our performance and [offer] us the capital to multiply without the need for a personal guarantee or even a lengthy application and approval process."

Unbiased capital access allowed Brooke and the Swella team to expand into a new location, growing the business and its impact. 

Conclusion: Driving equity through access

Expanding capital access for women-owned businesses isn’t just about financial fairness—it’s about fueling economic growth, strengthening communities, and unlocking untapped potential. When female founders have the resources they need to scale, they create jobs, drive innovation, and reinvest in the people and places around them.

Yet, too many women entrepreneurs still face systemic barriers when seeking funding. Traditional financing models weren’t built with them in mind—but that doesn’t mean we can’t change the landscape. By embracing more inclusive, data-driven underwriting models, we can break down these barriers and open new pathways to growth.

At Pipe, we’re committed to making capital access more equitable by eliminating outdated biases and providing women-owned businesses with the resources they need—

embedded in the software they use to run their business every day

. When businesses like Swella thrive, so do the communities they serve.

See how fintech can help improve financial access for underserved SMBs, including women-owned businesses.

Fintechs like Pipe are helping expand access to capital for women-owned business after years of being underserved by traditional financing models.

Expanding Access to Capital for Women-Owned Businesses

Exploring the future of embedded finance: Insights from Luke Voiles and Hiroki Takeuchi at Web Summit

At the recent Web Summit in Lisbon, Pipe CEO Luke Voiles and Hiroki Takeuchi, CEO of GoCardless, shared their thoughts on the evolving world of embedded finance. In this Q&A session, they discuss what embedded finance means, how it’s transforming businesses, and their vision for the future of financial technology.

[You can also scroll to the bottom of this post to watch the video of the full conversation]

Q: What does embedded finance mean to you, and how has it developed at your respective companies?

I think embedded finance, as a term, is something that means a lot of different things to different people. For us, the concept of financial services being embedded into people's day-to-day lives is really where we started. When we first started 

, we actually initially launched the product with a partner. One of the things we quickly realized was that businesses didn’t want to think about payments on their own. They wanted it to be embedded in the software or processes they were already running daily.

One of the things that's always driven a big part of our success has been partnering with software providers to serve payments within the processes and experiences they are having on a day-to-day basis. Whether that’s sending a customer an invoice or signing up a customer to a new subscription, being embedded into that process has been key.

 to enable our merchants to get easier access to capital, which is another form of embedding financial services. Partnerships are a key part of what embedded finance means to me.

My focus has been on small businesses for almost 10 years. Looking at small business pain points, the number one is always access to capital. Payments is one of the early leaders in embedded finance. I was at Intuit for a long time—about five years—and then I went to Square. Watching Intuit embed features like allowing customers to send invoices and get paid, we launched QuickBooks Capital, which now does $2.4 billion annually in loan volume to QuickBooks customers.

Companies like GoCardless enable instant bank-to-bank money movement for small businesses. Historically, lending was detached from the system—think OnDeck, Bluevine, or Funding Circle. Now, with truly embedded offerings, GoCardless can send anonymized data, allowing us to pre-approve customer bases. In just a few clicks, businesses can access capital, solving the number one pain point with a seamless experience and high customer satisfaction.

When we talk about embedding financial services, we’re solving big challenges like access to capital. Oftentimes, businesses aren’t even aware of what they can access. Historically, going to a bank was onerous, and many banks aren’t set up to cater to small businesses. The partnership between GoCardless and Pipe makes it easy. Pre-approved offers are surfaced within a merchant’s daily process, providing seamless, timely access to financial tools.

Yes, and it’s about reducing friction while staying compliant. Banks and traditional financial systems struggle to integrate seamlessly. Meanwhile, modern fintech platforms, through partnerships, offer near-instantaneous onboarding and access to services. Our focus at Pipe has always been to embed solutions where users naturally need them, enhancing efficiency and driving adoption.

Q: What are the key factors driving the implementation of embedded finance solutions?

Yeah, for us, as I mentioned earlier, payments aren’t something businesses think of as a standalone process—they’re part of a wider workflow. Our focus has always been on embedding payments as deeply as possible into how businesses already operate, making the experience seamless.

When it comes to our partnership with Pipe, it’s a bit different. We have about 100,000 small businesses using our platform. They love working with us because we help improve their cash flow, reduce late payments, and minimize the time and effort spent on admin. These are key problems we solve for them.

But, as Luke mentioned, access to capital remains a huge challenge for small businesses. Often, it’s not just about the ability to access capital but also about awareness. Many small businesses don’t realize what they’re eligible for. If they’re used to dealing with banks, it’s often a slow and cumbersome process.

The partnership with Pipe has been powerful because we can pre-approve businesses and surface their options directly within their workflow. For example, a business owner checking their customer payments or planning their cash flow can see a pre-approved offer to access capital with just a few clicks. It’s seamless and integrated into their daily operations, which is incredibly powerful.

I completely agree. What’s fascinating is how these integrations solve pain points. For instance, one of our partners serves vertical SaaS businesses for nail salons and hair salons. Another serves service-based businesses like electricians and plumbers.

When thinking about embedding solutions, we ask: What tasks are these customers completing daily in their software? For nail salons, it might be managing appointments, payments, or inventory. That’s when you look at where the need for capital arises—whether it’s paying payroll, covering a bill, or buying equipment. The idea is to present a pre-approved offer at that exact moment of need.

It creates a security blanket for small businesses. They know that access to capital is just a click away whenever they need it. This requires analyzing customer behavior and understanding their workflows. Sometimes, we even help our partners better understand their customer behavior through data analytics and tracking.

Q: How do you see trust in digital financial services evolving?

Trust has come a long way. When we started GoCardless in 2011, businesses were skeptical of online financial providers. They preferred the familiarity of a physical bank branch. But over time, as digital platforms proved their reliability, that perception shifted.

Today, merchants are not only comfortable using digital services but are also open to recommendations from one digital provider to another. This trust in interconnected digital ecosystems has been a game-changer, enabling seamless partnerships like ours with Pipe.

Q: How do differences in regulation and customer behavior impact the implementation of embedded finance solutions across geos?

Regulation plays a foundational role in fintech. While merchants may not see it as part of the value proposition, compliance is critical to enabling the service. For example, onboarding processes need to be seamless while meeting strict regulatory requirements.

Operating globally adds layers of complexity. For instance, you have to navigate regulations from UK regulators, European regulators, and even state-by-state regulations in the US. Solving these challenges in a compliant way while offering a great user experience is a competitive advantage in fintech.

Hiroki’s right. To expand internationally, fintech companies need a modular approach. For example, at Pipe, we use GoCardless as a backend partner for money movement. This eliminates the need to integrate directly with banks in multiple countries.

We’ve built an orchestration layer for onboarding and compliance. This allowed us to launch in the UK just six weeks after starting in the US. By swapping in local datasets and adapting to specific AML (Anti-Money Laundering) rules, we can scale quickly. It’s about being smart with modular systems and relying on trusted local partners to handle the complexities of reconciliation and compliance.

Q: How do you see embedded finance, user experience, and technology evolving?

Embedded finance is about making financial services available in the moment—whether on desktop software or augmented reality. The key is surfacing solutions when and where they’re needed. For example, when a business decides to invest in new equipment, having pre-approved financing embedded directly into that process makes a world of difference.

We’re still in the early stages of this trend, and there’s so much potential for growth.

I see two big trends: better data and changing interfaces.

On the data side, fintech has evolved from relying on tax returns and audited financial statements to leveraging real-time transaction data. With Pipe, we work with perfect cash flow data streams, allowing us to automate credit decisions 100%. As datasets become more comprehensive, risk-taking will improve significantly.

On the interface side, we’ve moved from paper statements to PDFs to dashboards in software like Square or QuickBooks. The future is about automating tasks entirely. AI agents, for example, could handle everything from booking appointments to taking payments automatically. This would free up time for small business owners to focus on their families and their passions.

Embedded finance is transforming how businesses access and use financial services. Technology allows for fast, seamless delivery, and partnership between platforms puts access at the point of need, even across the globe. 

Here's the full discussion between Luke and Hiroki from Web Summit Lisbon, November 2024:

Luke Voiles and Hiroki Takeuchi discuss the evolution of embedded finance solutions and their impact on capital access for small businesses.

See the key takeaways from Luke Voiles and Hiroki Takeuchi's discussion on the future of embedded finance and watch the video of the full conversation. 

Is Pipe a loan?

When it comes to funding growth for small businesses, there are a few different options. Let’s take a look at two popular alternatives, Pipe Capital and traditional loans (also known as term loans), to see how they compare for small businesses:  

No. Pipe isn’t a lender and Pipe Capital is not a loan.

Pipe Capital offers a fast, frictionless alternative to loans with a cash advance built into the software tools SMBs use every day. By leveraging anonymized transaction data, Pipe makes working capital available to a wide range of small businesses, including many that aren’t able to access traditional lending. 

Now we’ll take a closer look at both options and see how they compare.

Lending was the primary financing model for thousands of years, which is why the term “loan” is often a catch-all used for getting outside funds.

In the simplest terms, small business loans involve borrowing money (the principal) with an obligation to repay the loan along with interest, typically in fixed monthly payments. While these payments are very predictable, small business revenue, unfortunately, often isn’t. 

There are several potential downsides to loans for SMBs. First, as mentioned above, the fixed payment schedule can lead to problems if your revenue has seasonality or other fluctuations. For smaller businesses, loans can also be very difficult to secure, as underwriting models aren’t always designed to fit how those businesses operate. And speaking of secure, traditional loans are typically 

 which means the loan is tied to collateral, like equipment or real estate, which can be put at risk if you’re unable to repay the loan. 

Traditional lending is also based heavily on credit scores, which have been shown to carry inherent bias, often making it much harder for women- and 

 to access the capital they deserve. Unfortunately, while the term “loan” has become ubiquitous, 

 showed that only ~14% of small businesses had access to working capital through their bank. 

Now let’s look at Pipe’s solution to the challenges of traditional loans.

How does Pipe Capital compare to loans, in terms of interest?

When you take out a loan, you repay the principal amount you borrowed, possibly an origination fee (2-5% of the loan amount is common), and interest which accumulates until the loan is paid off. The longer it takes to repay, the more interest you accrue, whether that’s a function of a longer repayment term or some option from the lender to pay more slowly due to hardship. 

Since Pipe Capital isn’t a loan, there’s no interest and no origination fee. When a business requests an advance from Pipe, they get a transparent view of exactly how much they’ll pay — the amount advanced, plus a one-time, flat fee. Unlike an origination fee, the one-time capital fee is added to the total and paid over time, representing the total cost of capital. And, unlike interest, this fee never increases, even if it takes longer than expected to pay your advance amount. 

Pipe Capital was designed for business builders, as a way to deliver fast, flexible capital access embedded in the software they use every day. Unlike loans, it’s a cash advance, meaning small businesses can advance a portion of their future revenue for up-front capital when they need it.

Pipe Capital powers capital solutions through software partners

, businesses can be pre-qualified or pre-approved before they even seek financing. Rather than depending on credit scores and lengthy applications, our underwriting is based on live anonymized transactions, which allows us to assess the health of a small business from just a few months of history. A few simple compliance checks are typically all that’s needed, and once approved business owners can have funds in their bank account in 1-2 business days, depending on their bank’s policies. 

Our underwriting models can also be tailored to a specific industry to reflect a better understanding of how those businesses operate. All this enables Pipe to provide capital access to many businesses underserved by traditional lending. 

As an advance, our payments automatically flex with the revenue of the business, preventing them from being caught with a large, fixed payment during a month with lower revenue. 

Pipe Capital was designed for small and mid-sized businesses, all the way down to microbusinesses and even sole props. While many of these smaller businesses struggle to obtain loans,

 makes it possible to advance their revenue with Pipe Capital.  

. By partnering with Pipe, you can seamlessly embed Pipe Capital into vertical SaaS, payfacs, and other software platforms that processes card payments for B2B customers. Our capital offering is fully themeable to feel native to your platform, and we have three integration options to choose from, so you can launch in as little as a few weeks or build a deeper custom integration.

When it comes to accessing capital, small businesses face a range of challenges, especially with traditional loans that can be rigid, slow, and inaccessible to many. Pipe Capital offers a modern alternative, designed specifically to meet the needs of today’s SMBs. By advancing future revenue without requiring collateral, personal guarantees, Pipe delivers a flexible and frictionless financing solution that adapts to your business’s cash flow.

Whether you’re an SMB looking for fast, reliable access to working capital or a software company aiming to provide embedded financial services to your customers, Pipe Capital is a game-changer. It’s not a loan—it’s a smarter, simpler way to fund growth without the constraints of traditional lending. With Pipe, you can focus on what matters most: running and growing your business.

This post was originally published in November 2021 and updated in February 2025.

See how Pipe Capital is different from loans and how both work for funding small business growth.

Traditional bank loans may be the right fit for your company. See how Pipe compares to loans and which is the best embedded option for your platform. 

Is Pipe a loan? See how Pipe compares to loans and which is right for you

Will 2025 be the year of embedded finance for software companies?

Connect with Jon on LinkedIn to keep the conversation going. 

Jon Lear

Jon  Lear

The business world is no stranger to buzzwords, but embedded finance is more than a fleeting trend. It represents a profound shift in how software companies deliver value and generate revenue. By seamlessly integrating financial services like payments, lending, and payroll into their platforms, software companies can transform themselves into indispensable tools for their customers.

While embedded finance is growing rapidly, this article, like the growth trend itself, isn’t really about embedded finance; it’s about the software companies that will use it to take themselves to the next level, hitting their financial targets while serving their customers even better. It’s also about those customers, who gain the ability to do more of what they need in one place, as financial tools and capital access become an integral part of the software they use to run operations. 

Let’s look closer at launching embedded finance in 2025, how it can benefit you and your customers, and a few key strategies to make it a successful part of your roadmap and get a headstart on your revenue and EBITDA goals without stretching yourself thin.

What is Embedded Finance?: The Basics for Software Companies

embedded finance integrates financial services

—such as payments, lending, and payroll—directly into software platforms. This simplifies workflows, removes barriers, and meets customers right where they are so they can focus on operations.

For small and mid-sized businesses, this is a game-changer. Embedded finance eliminates the need to juggle multiple tools or visit external platforms to access critical financial services. Whether it’s securing funding, managing payroll, or streamlining payments, business owners can accomplish more within the software they already use every day. 

Ultimately, embedded finance bridges the gap between what SMBs need and what traditional financial services have offered. This evolution reflects a broader trend: software platforms no longer serve as standalone tools but as holistic ecosystems that solve multiple problems in one place. Success lies in aligning customer needs with seamless, integrated solutions.

The momentum around embedded finance has already begun, but 2025 will be the tipping point for software companies looking to leverage it for sustainable growth. Why? 

First, the software industry itself is experiencing significant evolution. As 

business owners continue to demand more from the platforms they use

, the need for all-in-one solutions is becoming non-negotiable. Companies that don’t meet this demand risk losing market share to competitors that can offer the financial capabilities their customers need. Embedded finance is no longer a luxury—it’s becoming a necessity.

businesses are struggling to access capital through traditional means

. The barriers posed by outdated lending systems, long approval processes, and limited access to credit are becoming increasingly apparent. As SMBs look for faster, more flexible solutions, software companies that embed financial services directly into their platforms will have a massive competitive edge. They‘ll not only provide more value but will also drive increased customer loyalty by meeting their customers’ needs in real-time.

Finally, the technology and infrastructure to support embedded finance are now more accessible than ever. Fintech solutions that integrate seamlessly with software platforms are maturing, offering easy-to-deploy tools that require little technical overhead. With the right partner, software companies can introduce embedded finance into their product offering quickly and efficiently, with minimal risk.

By embedding financial services, software companies can drive growth, meet market demand, and position themselves for long-term success. Those who wait will risk falling behind as competitors capitalize on the opportunity.

Key Benefits of Embedded Finance for Software Companies

Embedded finance can help software companies grow in several ways. Let’s explore how it can directly impact your revenue and EBITDA goals:

One of the most immediate benefits of embedded finance is the potential to unlock new revenue streams. By integrating financial services like capital directly into your platform, you can create a steady and recurring source of income. By partnering with a Fintech offering, you can launch with little to no engineering resources and can drive this revenue with minimal marketing budget.

2. Increased Customer Retention and Loyalty

When platforms integrate financial services, they tend to become more "sticky"—meaning customers are more likely to stay loyal to the platform because their operational needs (including financial management) are being met in one place. This reduces churn and increases customer lifetime value, as your platform becomes more essential to their business. Customers no longer need to switch between multiple tools and platforms to handle their business operations; they can do everything within your ecosystem, which enhances their overall experience and loyalty.

This stickiness also protects you against the roadmap of competitors. For example, if your customers process payments through your platform and you add an embedded capital offering, you protect yourself from the chance that the external capital provider they 

have used decides to launch a payment product of their own. 

One powerful aspect of embedded finance is that it’s fueled by your customers’ live data. Capital offers, for example, can be underwritten based on transaction history, eliminating much of the manual data collection that makes traditional loan applications so long. It can also provide access to data insights you previously didn’t have access to. 

For example, you may be limited to transaction data from processing customer payments. An embedded offering could provide insights into your share of wallet by comparing the revenue you process with your customer’s total revenue, or spend insights based on an embedded card. This data-driven approach strengthens customer relationships and opens up new opportunities for cross-selling and upselling. 

As more competitors adopt embedded finance, software companies that don't act will find themselves at a disadvantage. The ability to offer integrated financial services will become a key differentiator, especially for businesses in vertical markets. By offering this added value, you can position your platform as the go-to solution for customers in your niche, creating a significant competitive edge. 

Building a financial product in-house can take 6-12 months or longer, taking you away from your core focus. The right Fintech partner can help software companies scale embedded finance quickly and with minimal technical overhead. By leveraging pre-built solutions and APIs, you can embed financial services into your platform without investing significant resources into product development. Your partner can also help you expand the offering into new markets without starting from scratch, helping you maintain momentum as you grow.

In addition to increased LTV and the direct revenue potential of an embedded financial product, it’s also a powerful way to help your customers grow their own businesses and stay healthy. With access to financial services like working capital, your SMB customers can invest in their growth and their people, leading to increased GPV and LTV for your business and reduced churn from customers going out of business. 

In-House Development vs. Partnering with a Fintech: What’s Right for Your Business?

When deciding to launch embedded finance, one of the first decisions software companies face is whether to 

build the product in-house or partner with a Fintech provider

. Both approaches have their pros and cons, and the choice largely depends on your company’s resources, goals, and timeline.

Building an embedded finance solution internally gives you full control over the product, from design and functionality to customer experience. You can customize the offering to your exact specifications, ensuring it aligns perfectly with your platform and meets your customers’ unique needs. It also allows you to keep all revenue in-house and retain complete ownership of the technology.

However, building an embedded finance product in-house comes with significant challenges. First, it requires substantial technical expertise and a dedicated team, including engineering, product, risk, compliance, capital markets, GTM, and more. This can be resource-intensive and may divert focus from your core business operations. The development process can also take 6-12 months or longer, delaying your ability to capitalize on the embedded finance opportunity.

In addition, you’ll need to manage regulatory compliance, data security, and ongoing maintenance, which can become costly and complex. While you have control over every aspect of the product, the risk of failure is also higher without the experience of a Fintech partner.

2. Partnering with a Fintech: The Pros and Cons

Partnering with a Fintech provider like Pipe offers a faster, more efficient way to launch embedded finance. With ready-to-integrate solutions, you can get up and running quickly—often in a matter of weeks, not months. This approach dramatically reduces or even eliminates the need for in-house development and minimizes technical overhead.

A good Fintech partner brings industry expertise, robust infrastructure, and regulatory compliance to the table. They’ve already solved many of the challenges you’d face when building an embedded finance product, from underwriting to fraud detection. 

The downside is that you may have less flexibility and control over the product. However, Pipe offers a range of integration options and a fully themeable product experience that not only allows you to customize a product that feels native to your platform, but also gives you the time and focus to stay agile with your core offerings. 

The decision ultimately depends on your company’s priorities. If you have the internal resources, technical expertise, and time to build the product while maintaining full control, in-house development could be the best route. However, if you’re looking to launch quickly, minimize risk, and leverage existing Fintech expertise, working with a partner like Pipe can help you reach your goals faster and achieve better results.

Choosing the Right Fintech Partner for Embedded Finance

If you choose to go the partnership route, you’ll want to choose an embedded partner that not only brings the technical expertise and infrastructure to the table but also aligns with your business goals and understands your customer base. Here's how to choose the right fintech partner for your embedded finance strategy:

A key benefit of embedded finance is seamless integration. The Fintech partner you choose should offer pre-built solutions, APIs, or SDKs that easily integrate into your platform. This minimizes the amount of time and resources required to bring the financial services to market, reducing the technical burden on your team.

Pipe offers three integration options, from a hosted pilot to a fully-embedded API solution, giving you the perfect fit, whether your focus is a quick launch or a customizable user journey. You should also consider scalability—ensure that your partner’s solution can grow alongside your business, handling increases in transaction volume and expanding to new regions as you scale.

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