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

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

At its essence, 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.

Why 2025?

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.

Second, small and mid-sized 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:

1. New Revenue Streams

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

3. Enhanced Customer Insights and Data

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. 

4. Competitive Advantage

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. 

5. Cost Efficiency and Scalability

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.

6. Increased Gross Payment Volume (GPV)

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.

1. Building In-House: The Pros and Cons

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. 

3. Which Option Is Right for You?

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:

1. Integration Capabilities

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.

2. Risk Management and Compliance

Financial services require robust risk management and compliance programs. When choosing a Fintech partner, ensure they have strong security measures in place and can meet the regulatory requirements of your target market. This includes not only data protection (such as GDPR or CCPA compliance) but also industry-specific regulations for financing payments, etc..

Consider the expertise of the team you partner with, as well as the technology they have in place to aid in risk management, fraud detection, and compliance in a scalable way. 

3. Customer Experience and Support

Embedded finance isn’t just about technology—it’s about the customer experience. Choose a Fintech partner that prioritizes delivering a seamless and intuitive user experience. The financial products should feel as integrated and natural as the rest of your platform, with no friction for customers in accessing or using them.

Your Fintech partner should offer excellent customer support, helping you troubleshoot issues, optimize your capital offering, and ensure a smooth experience for your users. This level of partnership will enhance your ability to deliver high-quality service for your customers and outstanding metrics for you.

Predictions for Embedded Finance in 2025 and Beyond

As we look ahead to 2025, the direction of embedded finance points to rapid adoption and innovation. Software companies that integrate financial services will become leaders in their verticals, reshaping customer expectations and competitive dynamics. Here are some predictions for what’s next:

1. Embedded Finance Will Become the Industry Standard

Soon, embedded finance will no longer be a differentiator; it will be a baseline expectation for software platforms. Businesses of all sizes will seek out platforms that offer integrated financial services as part of a holistic, all-in-one solution. Software companies that don’t adapt risk being left behind as customers flock to platforms that offer greater convenience and value.

2. Vertical-Specific Solutions Will Dominate

The rise of industry-specific platforms, such as Toast for restaurants or ServiceTitan for contractors, will fuel the growth of tailored embedded finance solutions. These platforms will continue to evolve into comprehensive operating systems, seamlessly integrating payments, lending, payroll, and other financial tools to address the unique needs of their industries.

3. AI-Driven Financial Insights Will Transform SMB Decision-Making

With the power of artificial intelligence and live data, embedded finance will go beyond offering financial services to providing actionable insights. For example, predictive analytics will help SMBs anticipate cash flow challenges or identify growth opportunities, further embedding these platforms into the decision-making processes of their customers.

4. Regulatory Frameworks Will Mature

As embedded finance grows, regulatory oversight will increase. Software companies will need to navigate evolving compliance requirements, but this challenge will also drive innovation in risk management, fraud prevention, and secure financial integration. Those working with experienced partners will be at a huge advantage, with an expert managing the complexity on their behalf.

5. Partnerships Will Power the Next Wave of Innovation

The software marketplace will continue to emphasize collaboration. Partnerships between software platforms and Fintech providers will accelerate the development of embedded solutions, making it easier than ever for SMBs to access capital, manage payments, and scale their operations.

Conclusion: Seizing the Embedded Finance Opportunity

The rise of embedded finance is more than a trend; it’s a transformative opportunity for software companies. By integrating financial services into their platforms, businesses can unlock new revenue streams, enhance customer retention, and position themselves as indispensable tools in their customers' operations.

Whether you choose to build in-house or work with a Fintech partner like Pipe, the time to act is now. 2025 is poised to be a pivotal year for embedded finance, and those who embrace the opportunity will gain a competitive edge that defines the next chapter of their growth.

Embedded finance isn’t just about technology—it’s about creating a seamless, value-driven experience for your customers. By aligning your strategy with customer needs, industry trends, and the right partnerships, you can build a future-ready platform that stands out in a rapidly evolving market.