Embedded finance: open new revenue channels with your existing customer base
How a standalone payments app like Cash App can increase your revenue and help you save on transaction fees
After your last Uber trip, you didn’t write a check. You also didn’t hand over any cash. Instead, you paid for your ride right inside the Uber app. Perhaps you pre-loaded your balance to unlock a reward or discount? At the same time, your driver received a payout to their Uber branded debit card where they earn special cash-back rewards when making purchases.
This is a great example of embedded finance!
Embedded finance is a growing trend by which non-finance businesses are incorporating finance or banking tools in their business models. It represents massive revenue potential, but it’s also great for consumers.
As a consumer, why would you want to use your bank if you could get tailored rewards and discounts from your favorite brands? Clearly, we want tailored financial tools! Juniper Research has predicted that the embedded finance market will exceed $138 billion in 2026, from just $43 billion in 2021.
Even if you don’t have an existing app or tech-driven business model yet, your business could drastically increase your revenue by offering a form of embedded finance too.
How?
By creating a standalone finance app, like Cash App — a custom-branded payments app with multi-currency support.
First a bit of context
The finance industry used to be near-impossible to break into. Finance businesses used to only work on scale by serving millions of customers. It was expensive to establish partnerships, build the infrastructure, get licensed, ensure compliance, and win a big enough market share to make your money back — so it had to be big to make sense financially. The good news is that the whole fintech stack has changed with the raise of infrastructure providers making it easy to get started. It is now viable for fintech services to be successful on a much smaller scale without significant upfront costs.
As illustrated below, a key argument is that businesses are better positioned to drive customer engagement than traditional banking channels. Whether your business is in consumer retail, travel, transportation, healthcare, entertainment, luxury goods, or sports, it’s worth exploring whether an embedded finance solution would benefit your customers and help you make more money.
How to offer embedded finance to your customers
A key question to ask is whether you want to incorporate the features within your existing app experience or launch a standalone app under your own branding. The best-fit approach varies from business to business.
We believe payments are a great entry point for embedded finance products. Payments cover a high touchpoint need and allow you to build a relationship with your customer to expand from later on. By bringing payments under one roof, you can introduce more powerful benefits and incentives to your customers while driving down transaction fees and opening new revenue channels.
With this in mind, we will unpack the example of launching a complete standalone solution: a multi-currency payments app like Cash App with your own branding.
Start your own Cash App
The money-making potential for this kind of app has been proven. Cash App has gained over 30 million monthly active users and has generated $5.9 billion revenue in 2020, a 353% increase year on year, primarily from customers buying and selling bitcoin.
White-label wallet providers have made it easy to clone apps like Cash App. The app is already built, you simply add your branding and select the features you want. Compliance, custody of funds, on/off ramps, and liquidity are taken care of by third-party finance infrastructure providers.
Customers easily open an account, load their balance and transact in your ecosystem. Not only can they spend money at your business, but they can also split bills, buy and sell currencies or stock, open a savings account, and more.
You’ll have relatively low overheads and make money by charging small transaction fees that will quickly add up as your user base grows. You can also save on any existing merchant payment processing fees while getting better insights into customer spending!
Why would your customers care?
Now, you might be thinking, if it’s that easy, and there’s so much money to be made, isn’t it too late? Surely one Cash App or PayPal is enough to saturate the industry? Why would users care about your branded app?
Major Cash Apps with millions of users simply cannot address the specific needs of smaller communities, especially when it comes down to providing support and tailoring incentives.
Not only can a smaller app address customer needs in unique ways, but it also does not limit users to exclusively transacting within the same app ecosystem. Blockchain networks like Stellar have interoperable payments, which means that money can be transferred between wallets, even if they’re run by different providers.
Here’s an example of how this works. Let’s imagine Mike’s Bikes decides to launch a wallet for customers to load a balance and purchase cycling equipment at a discount. With interoperable payments, their users could theoretically use Mike’s Bikes wallet to transact with their student friends who prefer the (hypothetical) Stanford campus wallet. The only scenario where a wallet might not be interoperable is if Mike’s Bikes decide to put restrictions on an account in order to ensure, for example, that customers spend their cash-back rewards at their shop only.
Just like the hypothetical Mike’s Bikes app, your app could offer your customers niche and valuable features while offering interoperable payments. Even with thousands of wallet apps around, your app could still be successful.
At the start of this article, we claimed that you could make over $20,000 per month with minimal overhead or upfront capital investment. A closer look at the numbers will show you how it’s possible.
Making $20,000+/month
How much revenue you can generate will depend on your customer base, level of engagement and the expected billable transaction volume.
First, this example assumes you have access to 10,000 highly engaged customers on a monthly basis. Businesses that meet this criterion are for example airlines, malls, resorts, co-working spaces, hotels, clubs, stadiums, universities, etc. We also assume that you are using Rehive and Wyre to take care of your technology and compliance to cut major starting costs.
Further, a big assumption we make is that your customers love your brand and that you are in a position to offer them benefits when it comes to discounts or cash-backs. There needs to be a compelling reason for them to install your app.
A use case that is a particularly good fit is if you need to do any form of payouts, whether it is salaries, wages, or commissions.
Getting into the details:
Let’s say you launch a multi-currency payments app where deposits and payments are free, but you charge a 1.5% fee when customers buy bitcoin from their balance or make withdrawals. This is still quite competitive with Coinbase or Cash App, which charges between 1.0% to 2.3% for crypto purchases.
Once you reach 10,000 monthly active users who do an average of $250 billable transaction volume per month, you’ll generate up to $37,500.00 in monthly transaction revenue.
Rehive’s subscription fees start at $250/month for the white-label option, while usage fees range between $0.25 to $0.50 per active monthly user. Let’s assume Wyre charges around 0.50% for currency conversions and withdrawals. In this scenario, Rehive and Wyre’s service fees would add up to roughly $17,750.00/month, which means you can make $19,750/month in profit.
Remember, you don’t have any major overheads other than Rehive and Wyre’s service fees. Compliance, building features, and costs of scaling up the system as you acquire more users are all taken care of.
So the question is, can you reach 10,000 engaged customers?
As the embedded finance movement continues there will be more capabilities to cherry-pick and offer your customers. Perhaps you want to add lending, insurance, or savings. Starting with a white-label payments app to test customer interest is the first step towards building a base to expand from.
Getting started
Rehive and Wyre have partnered to make it easy to launch your own branded fintech app in less than 10 business days. It only costs $250/month to get started with a white-label web app. Wyre takes care of compliance, custody of funds, and on/off ramps, while Rehive provides a fintech app builder to help you configure, customize and publish your app.
Rehive supports a range of capabilities: send and request payments, point of sale payments, in-app purchases, currency conversions, reward campaigns, invoicing, bulk payouts, and more. With Rehive you can configure complex logic like fees, limits, controls, and different app flows without coding. Everything with your branding!
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