2022 has been volatile and a change for almost all companies, and even more so for growth-oriented SaaS companies. In order to come out from the other end of this market stronger, SaaS companies need to figure how to grow, while at the same time being lean.
One way to achieve “lean growth” is through including financial products into your current customer offerings. Embedding financial products into SaaS offerings can create a new revenue stream, increase user lifetime value and increase core business revenue through making your products easier to purchase. While DIY approaches can be time consuming and expensive, partnering with an embedded platform like Bond can help you minimize upfront investments and get your product to market in a few months. Cledara has already proven how this can be done - now growing ARR 44% MoM - by partnering with Bond.
Why vertical SaaS and embedded finance are a perfect match
Customers serving critical verticals, like healthcare and restaurants, benefit from purpose-built software that can serve their unique needs and they rely heavily on these tools and companies that provide them. Since vertical SaaS companies are so deeply enmeshed in their customers’ operations, introducing financial products just makes sense.
- Create a new revenue stream (monthly fee and or interchange)
- Reduce churn (customers have greater hurdles to leave the product)
- Understand customers better (financial data, usage habits)
Roy Ng, Bond’s co-founder and CEO, says, “Over the long term, the vertical software players really have an advantage over “fintech only” companies because they're merging financial services to the software their users are already using.” Early vertical SaaS firms such as Shopify or Toast have proven this point; they first gained the trust of their customers and then started reselling financial services. In creating this pathway forward, vertical SaaS companies can embed a range of new products into their software that their existing customers will be able to utilize such as insurance, cards, and loans, for example.
How embedded finance benefits vertical SaaS
Integrating financial products into already existing software by partnering with Bond.
- Increases average revenue per user (ARPU): Companies can potentially increase their ARPU by 2-5x depending on how much customers spend on software and services.
- Opens new market opportunities: Higher margins enable companies to go after verticals that were previously too small.
- Expands the user lifetime value (LTV): Higher ARPU also increases LTV of users, which allows companies to go after previously too-expensive customers. Offering financial services provides more value to customers and makes them highly engaged, which helps with customer retention and improves product stickiness.
- Increases customer engagement: Offering financial services provides more value to customers and makes them highly engaged, which helps with customer retention
- Customer insights through transaction data: Embedded finance platforms provide SaaS firms with data on customers leading to deep insights and possible new business opportunities.
Embedded financial service options
SaaS firms have copious amounts of user data to help them decide which financial services can add the most value to their customers. Payments are often the first service many firms start to offer,but there are various other services that can be embedded into software, such as lending, cards, bank accounts, and money movement.
- Payment processing: SaaS firms can integrate a payment processing capability into their software and enable users to accept credit and debit card payments from their customers without going through a third party.
- Lending: SaaS companies can use proprietary transaction and usage data to help with underwriting risk and offer loans to their customers. This offering is especially effective in categories not well served or understood by traditional banks.
- Cards: SaaS firms can issue virtual and physical cards to their customers who can then distribute them to employees, contractors, or others. These cards are especially valuable for companies with frequent travel and individual spending needs.
- Bank accounts: SaaS businesses enable their end customers to create transactional bank accounts for collecting and making payments. Customers benefit by being able to manage their money from a single place instead of making repeated bank transfers.
- Money movement: SaaS companies can integrate money movement features into their software and enable customers to send money internally or externally using ACH or wire transfers.
Successful SaaS using embedded finance
Various SaaS companies have already deployed embedded finance products.
Squire helps barbershops manage their business more efficiently and they teamed up with Bond to build the Squire Card that offers a range of benefits from barbers being able to get the net pay and the tip the moment their customers check out with the ability to start spending money the same day to free cash withdrawals across more than 25,000 ATMs. Since the card comes with a bank account and routing number, it can also be used to move money between accounts.
Qoins provides financial guidance and education while additionally helping their users pay down their debt with each swipe of their Qoins card. With already over $30M in debt paid down, Qoins gives a wide financial snapshot to their users that enables savings and, ultimately, increasing credit scores.
Cledara enables businesses to track and manage their usage and spending on various SaaS tools; the platform also offers virtual debit cards that companies can use to purchase SaaS offerings. Each card can have a spending limit and can be easily canceled. Additionally, users get 2% cashback on their software spend when using a Cledara card. They chose to partner with Bond to launch credit products for its U.S. customers and, in the first six months, they were able to grow their MRR 35% MoM
Efficiently embed financial services
Vertical SaaS firms looking to introduce financial products have two options. One includes a lot of time and red tape by spending years securing regulatory permits, finding a bank that offers favorable conditions, integrating with processors and networks, and building financial products.
Another option is to partner with enterprise-grade embedded finance platforms like Bond — this is the path of least resistance. SaaS companies won’t have to worry about permits or integrations and financial products can be rolled out in as little as four weeks. Bond provides a multi-product platform that allows companies to offer FDIC-insured accounts, both virtual and physical credit and debit cards, lending, and money movement. All of these products can be combined in various and multiple ways to offer unique and valuable solutions.
New life of vertical SaaS
Businesses that know how to harness this embedded finance opportunity will be able to provide more value to their customers and gain a competitive edge. A new era of fintech-enabled SaaS is well underway.
If you’re a SaaS firm and are looking for a tech partner to help you think about and launch embedded banking products, contact Bond to learn more about how we can help regarding your embedded banking journey.
No engineering resources? Launch using Bond's white label commercial charge card solution.