The business landscape has changed. Gone are the days of enormous funding rounds, explosive hiring, and impressive (but arguably vanity) metrics. Companies must now focus on more than rapid expansion; they need a sustainable growth strategy.

A sustainable business is a profitable business, and profitability means shifting from solely reducing costs to driving revenue. A key element in achieving this is embedding financial services into your product. This approach prioritizes providing the best user experience while generating new revenue streams, ensuring growth across new markets.

At Swan, our ambition is to become the driving force behind Europe’s payment landscape, fueling the success of remarkable growth stories.

Let’s explore how 150+ companies partner with Swan to build a more profitable business model using embedded banking.

Set your business up for profitability

Embedded banking empowers product leaders to enrich their software with banking flows that drive engagement, boost user retention, and create new revenue streams. Products with integrated banking features are notoriously sticky: your customers are much more closely tied to your systems and thus less likely to churn.

Besides staying with you longer, users are willing to pay more for the improved experience. In 2020, **a16z famously argued that SaaS businesses could increase revenue per customer by up to 5x with embedded finance,** and this prediction wasn’t far off.

Some of our partners have already seen their customer lifetime value triple just 6 months after going live — a SaaS partner even reported €15 in additional MRR among users who had adopted the new offering. Embedded banking is an innovative way to set your business up for sustainable growth. But, how can it achieve this?

Make your product stickier

When customers return to a product and use it repeatedly, the product is said to be "sticky". A secret of the banking industry is that it is a sticky business. Software products become especially sticky once banking features are added, and mobile banking retention rates are extremely high—higher than almost any other type of app.

When you become a provider of both core software and financial services, you’ll have a deeper understanding of your customers’ dynamics and needs. You’re empowered to create a much smoother user journey, by letting your customers earn, store, manage, and move money without having to leave your platform. And having a loyal, active user base paves the way on your path to profitability. Agi Dhima, Head of Operations for Payments at Expensya, shares;

”By providing cards and new ways to manage expenses, our customers get more value. This positions Expensya as an end-to-end expense platform, and while our customers get a way better experience, it’s also good for business. We’re getting great lead generation, and also more revenue.”

Add revenue streams on top of existing business

Much of a product’s success hinges on a smart pricing model. People usually assume that the better the product, the more you can charge. But higher subscription fees aren’t the only way to monetize a product with embedded banking features. To give you a better idea, let's look at some detailed examples.

Payments revenue

Payments are a perfect entry point into financial services: these features generate data, trust, and very likely, additional banking needs. With embedded banking, companies can facilitate accounts and payments like a regular bank—and earn revenue from transaction fees.

For European companies, this essential layer of the banking experience usually means payments on the SEPA network. This is how people get to make real-time bank-to-bank transfers. Such operations can be push payments, where the payer initiates the sending, or pull payments, where the payee pulls funds into their account (like with direct debit).

In terms of monetization, it's relatively straightforward. Let's say a software company pays €0.15 for a SEPA Direct Debit, and decides to charge their customer €0.40 for this exact payment. Each SEPA transfer will generate a net revenue of €0.25.

Some Swan partners make a margin on such transfers, charging a fixed fee, sometimes even a percentage, on each operation performed. Providing you have a large user base, these small streams will eventually create a big river of cash flow!

Interchange revenue

The secret sauce of the payment business is what’s known as interchange. This is a very common revenue driver for fintechs. Banks, neo-banks (e.g. Revolut), and even retailer companies (e.g. Ikea) generate very meaningful revenue from interchange.

Interchange is the portion of each payment made that is paid to a card issuer such as Swan. With Swan’s partner revenue-sharing model, you can benefit from a percentage of every transaction made through your embedded payment features. Interchange is calculated per transaction volume, but other variables are taken into account, including issuing country, type of card, total transaction amount, and even the merchant category.

Be aware that the perks of interchange are less relevant in the consumer space. While in the B2B world, card issuers might see up to 1.5% interchange, a European 2015 antitrust law caps consumer card interchange fees at 0.2% for debit and 0.3% for credit cards.

Deposits revenue

When customers store money in accounts powered by Swan’s banking infrastructure, those deposits don’t just sit idle—they can actively generate value. If your users cumulatively deposit over €5M annually, you may be eligible to earn a portion of the interest generated on these funds, creating a steady, passive income stream.

Deposits revenue grows alongside your customer base and their financial activity. This compounding effect means that as more users trust your platform to manage their money, your revenue potential scales proportionally.

In addition, offering deposit services to businesses or freelancers differentiates your product in competitive markets. These enhanced capabilities strengthen your value proposition while reinforcing your profitability while building a long-term business advantage.

Financing revenue

Financing revenue, or credit revenue, is when you give your customers the funds they need today and expect them to pay them back in the future, with an added fee or with interest.

What is interesting about embedded lending, especially for B2B companies, is that platforms can create innovative financing options that banks don’t even offer. For starters, banks aren’t specialized enough to address many niche financing needs. And when it comes to the quality of customer data, banks aren’t anywhere near as strong as tech companies.

Tech companies naturally have deep visibility into the dynamics of their customers’ lives and businesses. Hence, they’re able to make more informed lending decisions and even take automatic repayments as a percentage of future earnings.

The income you’ll get from credit revenue depends, of course, on the financing volume and terms. Cases can vary widely, but if you’d like some help forecasting your project, please feel free to contact us.

Software subscription revenue

Last but not least, the most obvious source of new revenue: charging more for your software subscription. It’s only natural to increase your subscription fee when you’ve added new features and improved your overall customer experience. In our experience (with our 150+ partners), we estimate that tech companies increase their software subscription price by up to 20% after integrating banking features.

Perhaps, by adding an extra €20/month in software subscription, you can afford to offer payments at a cost or share interchange with your end users as part of an incentive program—and still end up with a great revenue stream from software subscription.

Or, if you feel your product is not yet robust enough to justify an increased price, you can always sell individual banking features as add-ons. By allowing your customers to personalize products with additional, one-time charged services, you can guarantee a new revenue source while you experiment with product adoption and pricing.

You can experiment with a range of pricing strategies:

• High-margin software + low-margin financial features
• Low-margin software + high-margin financial features
• Medium-margin software + medium-margin financial features

Let’s recap

Software companies who embed financial services — tailored specifically to their core users— can drive growth, boost user engagement, increase loyalty, and add new revenue streams on top of higher-priced subscriptions. Embedded finance is a feasible path to a:

• Stickier product
• Financial services reselling
• Interchange share

Which individually and altogether leads to increased revenue and profitability.

To help companies understand the impact of banking features, we’ve created a tool to estimate revenue potential. It’s simple: use our calculator to estimate the potential revenue you could generate by embedding banking features. Try Swan’s revenue calculator here.