{"id":966,"date":"2025-09-26T15:23:36","date_gmt":"2025-09-26T22:23:36","guid":{"rendered":"https:\/\/embedded.gusto.com\/blog\/?p=966"},"modified":"2025-10-20T15:33:19","modified_gmt":"2025-10-20T22:33:19","slug":"embedded-fintech-user-experience","status":"publish","type":"post","link":"https:\/\/embedded.gusto.com\/blog\/embedded-fintech-user-experience\/","title":{"rendered":"Beyond the Transaction: The Flywheel Connecting Embedded Fintech and User Experience"},"content":{"rendered":"

This is Part 1 of a two-part series, you can read Part 2 here<\/a>.<\/em><\/p>\n

Introduction: The Trillion Dollar Reshaping of Software and Finance<\/b><\/h2>\n

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While AI gets more headlines of late, embedded fintech continues to fundamentally reshape the digital economy by shifting the user experience and how value is created, distributed, and captured \u2014 far beyond the initial convenience of in-app payments.\u00a0<\/span><\/p>\n

Embedded fintech products transform SaaS applications from simple software providers into the indispensable operating systems \u2014 the strategic “Second Act” that unlocks value beyond the linear growth of subscription fees. They also represent the frontier of value-added services that banks and accounting platforms can offer to business clients who want greater visibility, control, and insight into their end-to-end cash flow.<\/span><\/p>\n

The scope of this transition can get lost. In the United States alone, the value of transactions flowing through embedded fintech products is expected to exceed $7 trillion by the end of 2026 (up from $2.6 trillion in 2021); while estimates vary, this represents just under a quarter of all US digital transactions. These figures suggest that embedded fintech will account for more than 10% of all U.S. financial transaction value within the next few years.<\/span><\/p>\n

Leading venture <\/span>investors like Bessemer (BVP)<\/span><\/a> have taken note as well. “Most of our vertical SaaS leaders emerged as market-defining companies through the power of \u2018The Second Act.\u2019 In many cases, these businesses leveraged payment products and embedded fintech solutions to expand their addressable markets, drive product stickiness, and expand their average contract values.”<\/span><\/p>\n

“Financial services components of these businesses were strong catalysts for increased retention and stickiness, and led to ‘sneaky large TAMs.’\u201d\u00a0 \u2014Charles Birnbaum, Bessemer Venture Partners, <\/span><\/i>Wharton Fintech Podcast<\/span><\/i><\/a><\/p><\/blockquote>\n

Other well-known investors from <\/span>A16Z<\/span><\/a>, <\/span>Matrix<\/span><\/a>, <\/span>Tidemark<\/span><\/a>, and <\/span>Redstone\/ Defy<\/span><\/a> have identified similar dynamics among their successful portfolio companies. The initial software offering\u2014the \u2018First Act\u2019\u2014serves to acquire the customer and become the system of record or create a \u2018control point\u2019. Then embedded fintech products\u2014the \u2018Second Act\u2019\u2014solve related pains for customers and therefore increase value. As Angela Strange and team from A16Z note, \u201cFintech holds, or even lowers, the cost of customer acquisition (CAC), while increasing the lifetime value (LTV) in vertical SaaS.\u201d\u00a0<\/span><\/p>\n

When SMB-focused platforms execute well, smart strategy starts to look like alchemy and a flywheel takes hold\u2014we\u2019ll look at several companies where this dynamic exists like Shopify, Toast, and Mindbody, among others.\u00a0<\/span><\/p>\n