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  • Frank Tian

Embedded Finance - How Big?

How big is the opportunity?

Bain recently provided an estimate.

From 2021 to 2026, the revenue growth opportunity in the US: $29 billion.

🟦 The Scope

◼️ Bain focused on 2 roles in embedded finance in the US.

Platform: e-commerce sites and apps that host products and own distribution.

Enabler: technology infrastructure supporting product delivery to platforms.

◼️ Major products for embedded finance

  • Lending

  • Payment

  • Banking and card

◼️ Out of scope

  • Neobank/fintech directly interfacing with customers.

  • Closed-loop digital cards such as Starbucks.

  • Cobrand credit cards.

  • Mortgage.

🟦 The Breakdown

The $29 billion revenue growth opportunity by segment:

◼️ Consumer payment

Revenue opportunity: +9 billion.

Embedded penetration: 15% → 29%.

◼️ B2B payment

Revenue opportunity: +5 billion.

Embedded penetration: 3% → 8%.


Revenue opportunity: +3 billion.

Embedded penetration: 4% → 11%.

◼️ POS lending

Revenue opportunity: +3 billion.

Embedded penetration: <1% → 1%

◼️ B2B lending

Revenue opportunity: +1 billion.

◼️ Banking and card issuing

Revenue opportunity: +9 billion.

Embedded penetration: 2% → 9%

🟦 Other Takeaways

◼️ The revenue share out of the retail volume (so-called “take rate” by Bain) is expected to drop for Enablers, due to the competition. Enablers have to seize up the market growth opportunity by scaling up.

◼️ Besides payment and lending, there are other growth opportunities such as insurance, tax, and accounting.

◼️ Incumbent financial institutions may find growth opportunities in specific vertical segments.

🟦 Forecast - Never Easy

One challenge is to define the embedded finance market - a reflection of the more disintegrated ecosystem and new business models.

◼️ For example, Apple Card is used as an example of the enabler while cobrand credit card is excluded.

Isn’t Apple Card a credit card just without Goldman Sach’s name on it?

◼️ BNPL’s take rate is estimated to be 150-180 bps - it’s unclear what this number exactly captures. The latest CFPB report shows a merchant discount of 250~ bps and overall revenue of 400~ bps.

Also not sure if the 4X revenue projection has factored in the persistently high rate environment and expected regulatory headwind.

◼️ Sizing a quickly evolving market is never easy. Now at least we have a quantified result as the guidance.

Bain Report for Embedded Finance

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