Embedded finance: embeddable modules or standalone applications?

When it comes to embedded finance, there are two ways to go about incorporating it into your business - through embedded modules or through standalone applications. Both have their own advantages and disadvantages that should be considered before making a decision.

At face value, embedded modules may sound like a feasible product decision, but it is really hard to keep the end-user experience coherent. You might end up using one provider for insurance on checkout and another provider for on-demand loans. The end result is a product infested with iframes that will result in a disconnected user experience. One way to get around this is to build on third-party APIs directly, but this increases cost and delays go-to-market.

A standalone application does imply that the user leaves your existing app to tap into your finance offering while everything remains under your branded umbrella. Payfare is powering Uber Eats, Lyft and Doordash where they have taken the approach of doing payouts to a custom branded debit card to their drivers. It is fascinating to see that the application is even published under the Payfare app store account, instead of the brand doing so themselves.

The advantages of a standalone application are that you can ensure banking-level security to the end-user without spoiling your core app experience, it forms a solid base to expand into more finance offerings and saves time to market without upfront development needed. Fintech app builders like Rehive is making it easy for marketplaces to launch their own branded finance strategies out of the box. 

While Stripe has started out as primarily an API-based product, they have recently ventured into the white-label experience with their BaaS products. They have created standalone consumer facing web applications for some of their product lines, such as Stripe Capital and Stripe Issuing. Businesses can set up their branding and simply send out a link for customers to apply. The end-user may notice that the UI look and feel are somewhat different from the core product, but it is less intrusive than trying to embed everything in your existing experience. The customer simply applies for a card or loan, and Stripe takes care of the rest. It is to be seen if Stripe will offer a full white-label finance suite that combines loans, cards, and balances together in a single portal for end-users.

Ultimately, we can expect a combination of some financial aspects being baked into the core applications, while others being packaged in a standalone app. In the end, the advantage of embedded finance is not just the embedded experience, but more how the underlying service is tailored for customers' needs. For example, Lyft will always understand its drivers' needs better than a bank could. As a result, they can offer better credit, savings, payment methods, deals, etc. than a general purpose bank.