Embedded Finance: What It Takes to Prosper in the New Value Chain (Bain & Company)

Summary

• Embedded financial services accounted for $2.6 trillion, or nearly 5%, of total US financial transactions in 2021.p.3
• By 2026 embedded finance will exceed $7 trillion of total US financial transactions.p.3
• The 2021 US market for platforms and enablers is estimated at $22 billion in revenue, expected to more than double to $51 billion by 2026.p.6
• US revenue across payments, lending and banking is expected to grow at a 19% compound annual growth rate.p.11
• The research draws on over 50 interviews with industry practitioners, market experts, and analysts.p.4
• Embedded finance is expected to exceed over 10% of total US transaction value by 2026.p.4

Key insights

1. Payments and lending will continue to be the largest embedded financial services, bolstered by insurance, tax, and accounting.p.3
2. The new value chain involves four participants: the end customer, platforms, software enablers, and a regulatory services or license provider.p.6
3. Incumbent financial institutions face threats of shifting economics and adverse selection but can also realize tremendous growth.p.3
4. Customers prefer the bundle of software plus payments due to enhanced customer experience, cost savings, and access and risk.p.10
5. Cobranded credit cards and closed-loop digital cards are excluded from the research.p.8