Embedded finance in practice: what investors, acquirers and operators need to know

This is the second of two articles on embedded finance in SMB SaaS. The first article set out the strategic and market context: why the traditional per-seat revenue model is under pressure, how leading platforms including Shopify, Toast and Square have used embedded financial services to build more resilient businesses, and why the recent moves by Xero and Intuit signal that this shift has become a competitive necessity. This article goes deeper on implementation and risk: how investors and acquirers can assess embedded finance maturity, what the 2024 Synapse collapse changed for anyone building on Banking-as-a-Service (BaaS) infrastructure, and why the European open banking environment offers a distinct set of advantages for platforms in this market.

For investors, acquirers and operators, the practical question is not whether embedded finance is attractive in principle. It is whether a given platform has embedded financial services in a structurally defensible way — one that strengthens retention, broadens revenue, deepens customer dependency and supports a premium valuation. Many platforms can point to a payment capability. Far fewer have embedded finance deeply enough to change customer behaviour and platform economics.

Key takeaways

What investors and acquirers should look for: signals of embedded finance maturity

For strategic acquirers such as Sage, Intuit, or Salesforce — all of which already operate embedded financial products (Satago invoice finance via partnership, QuickBooks Payments and Capital, Salesforce Payments via Stripe) — and for private equity investors evaluating SMB SaaS platforms, the practical question is not whether embedded finance is a good idea in principle. It is how to distinguish between platforms that have embedded finance in a structurally defensible way and those that have merely bolted on a payment widget. The following signals are the most diagnostic:

• Fintech gross profit as a percentage of total gross profit. A platform where financial services contribute 30%+ of gross profit is qualitatively different from one where they contribute 5%. Track the trajectory, not just the snapshot.
• Net take rate trajectory. Rising take rates alongside growing gross payment volume signal that the platform is deepening its share of customer economics, not just processing more volume at flat margin.
• Native vs. bolted-on integration. Embedded finance that requires a customer to leave the primary workflow to complete a financial transaction generates far lower adoption and retention uplift than finance integrated at the point of value creation (a restaurant completing its end-of-day settlement, a law firm billing a client from within the matter management screen).
• Proprietary underwriting data. Platforms that process transactions for their customers accumulate real-time revenue data that constitutes a proprietary underwriting asset. This is particularly valuable in lending: a platform lending against its own transaction data has a real-time information advantage over a BaaS lender relying on bank statements, though this is best understood as better risk visibility rather than lower risk outright; platform lending books remain exposed to concentration and correlation risk, since a downturn in the platform's core vertical can hit borrower performance and the platform's own transaction data at the same time.
• BaaS counterparty concentration. Following the Synapse collapse (see the BaaS risk section below), heavy reliance on a single middleware provider is now a material due diligence risk. Assess whether the platform has redundancy, direct bank relationships, or a migration path.

The embedded finance risk landscape: what the Synapse collapse changed

No discussion of BaaS partnerships as the pragmatic route to embedded finance would be complete without addressing the event that materially changed the risk landscape: the April 2024 bankruptcy of Synapse Financial Technologies. Synapse, a major BaaS middleware provider backed by Andreessen Horowitz, served approximately 100 fintechs and 10 million end users. When it filed for Chapter 11, between $65 million and $96 million in customer funds became inaccessible due to irreconcilable ledger discrepancies between Synapse and its partner banks. The fallout was significant: Evolve Bank & Trust, a key BaaS partner bank, received a Federal Reserve cease-and-desist order in June 2024 for deficiencies in its fintech oversight. In September 2024, the FDIC proposed new rules requiring banks to maintain accurate, independent recordkeeping of beneficial owners in custodial accounts, directly in response to the failure.

The practical implications for SaaS platforms pursuing embedded finance are threefold:

1. Counterparty selection is now a diligence exercise. The viability, regulatory standing and reconciliation architecture of any middleware provider should be evaluated before contracting, not assumed.
2. Platforms carry their own obligations. Businesses that process financial transactions on behalf of their customers should understand their responsibilities under emerging regulatory frameworks, including KYC, AML and any applicable custody requirements.
3. Consolidation is, on balance, healthy. These developments have accelerated the BaaS market's consolidation around better-capitalised, more directly regulated providers. Stripe, Adyen and the surviving Tier 1 BaaS providers are better positioned than ever, but the era of treating any BaaS provider as interchangeable utility infrastructure is over.

The European dimension: open banking as an accelerant

While the most visible embedded finance case studies to date have emerged in the United States (for instance, Shopify, Toast, Square), the structural dynamics apply equally in European markets, and in some respects the conditions for acceleration are more favourable. The PSD2 framework, and its successor package - the PSD3 directive and the accompanying Payment Services Regulation (PSR), on which the Parliament and Council reached political agreement in late 2025 and which is now awaiting final adoption and publication in 2026 - mandates open banking access, effectively lowering the cost of embedding account-to-account payments and financial data into SaaS workflows. UK-headquartered platforms are already acting on this: Xero has partnered with Capify and other alternative lenders to offer embedded SMB financing; Tide has built embedded banking and lending directly into its SMB current account platform; and Sage, through its deep partnership with Satago (embedded invoice finance), has a more developed embedded finance position than its public narrative often reflects.

For European investors and acquirers, the open banking tailwind materially improves the unit economics of embedded finance relative to the card-network-dependent US model, and it compresses the time to viable product for platforms willing to invest.

Embedded finance roadmap: six steps to execution

SaaS companies, particularly those focusing on SMB audiences, should consider taking proactive steps to secure their futures through embedded finance. The roadmap below sets out the key steps for businesses looking to leverage its potential.

• Assess integration opportunities. Conduct a deep dive into customer operations to identify financial pain points, such as payment processing, cash flow management, or access to capital. Crucially, use this diagnostic to also assess your own organisational readiness — your engineering capacity, risk appetite, and regulatory tolerance — as these will directly inform which route to market makes most sense.
• Make a deliberate build vs. buy vs. partner decision. This is the most consequential choice in your embedded finance journey and it deserves rigorous analysis rather than a default assumption. Building financial infrastructure in-house offers the highest long-term margins and maximum product control, but demands significant engineering resources, regulatory expertise, and time. Acquiring a fintech can accelerate capability-building, but carries substantial integration risk and upfront capital requirements that are rarely appropriate for SMB-focused platforms at an early stage. For most companies, partnering with a Banking-as-a-Service (BaaS) provider, such as Stripe, Unit, or Adyen, offers the most pragmatic starting point, delivering pre-built financial infrastructure, reduced compliance burden, and a faster path to revenue. The trade-off is a lower take rate than a fully owned solution, but the speed and risk advantages typically outweigh this at the outset. Importantly, these options are not mutually exclusive over time: many successful platforms begin with a partner-led model and selectively build or acquire capabilities as their embedded finance business matures.
• Prioritise customer value. Ensure financial offerings create tangible benefits for your customers, such as reduced operational friction, faster access to capital, or simplified billing. Whichever delivery model you choose, the customer experience must feel native to your platform: embedded finance that feels bolted on will struggle to drive the adoption and engagement needed to move the needle on ARPU and retention.
• Navigate compliance deliberately. Embedding financial services is not purely a product decision; it carries real regulatory obligations that vary significantly depending on your chosen model and geography. Partnering with an established BaaS provider substantially reduces this burden, as much of the compliance infrastructure is handled on your behalf. However, even in a partner-led model, your platform will likely need to address requirements around KYC, AML, and data handling. Build compliance considerations into your go-to-market planning from the outset, not as an afterthought.
• Track expansion metrics. Monitor key SaaS KPIs like ARPU, net revenue retention, and customer usage to understand embedded finance's impact on revenue durability and valuation appeal. As your model evolves, particularly if you move from a partner-led approach toward greater ownership, track take rates and margin contribution from financial services separately, so you can make evidence-based decisions about when and where to deepen your investment.
• Iterate and scale. Continuously refine your embedded finance offering based on customer feedback, applying lessons learned to expand adoption and amplify the impact on growth. Revisit your build vs. buy vs. partner calculus periodically — what is the right answer at launch may not be the right answer at scale.

Conclusion

The SaaS companies that will define the next decade are unlikely to be those that simply weathered the valuation reset and returned to the old playbook. They will be the ones that used the reset as the forcing function it was: to build businesses whose revenue grows with their customers' success rather than their headcount. Embedded finance is not the only path to that outcome, but it is one of the most proven. The evidence from Shopify, Toast, Square and others is not that financial services are a nice addition to a SaaS platform; it is that, in the right conditions, they can become the platform. That caveat matters here: these are payments-native, transaction-heavy businesses and the model translates far less cleanly to pure-workflow SaaS with no natural payment flow to intermediate. The regulatory and balance-sheet risk that comes with financial services can also erode the very margin resilience it promises. Embedded finance is a powerful path to durable revenue where the conditions fit, but not a universal one.

For SMB-focused SaaS companies willing to make the strategic investment, the opportunity to move from vendor to indispensable financial partner has rarely been more accessible, or more necessary. For the investors and strategic acquirers evaluating these businesses, the ability to distinguish between genuine embedded finance infrastructure and surface-level positioning — to identify platforms that own their customers' financial workflows rather than merely passing through them — is, increasingly, the difference between a premium multiple and an average one.