The embedded finance market is large and growing, and will impact B2B payments in particular, Priority Chairman and CEO Tom Priore writes in the new PYMNTS eBook, “2023 Payments New Year’s Resolutions.”
While payments, like so many other industries, will be impacted by broad economic trends, the economic downturn presents a unique opportunity for advances in payment system innovation that benefit evolving customer preferences and expectations for convenience and speed.
In 2021 we reflected that “pandemic-era innovation [like mobile payments, digital invoicing and automated payable] didn’t get pushed aside as some had predicted, but rather continued to dominate a growth trend that appears to be foundational to the evolution of modern commerce.”
Recently released research conducted by McKinsey and Bain show that the embedded finance market is large and growing. Bain estimates the 2021 U.S. market for platforms and enablers at $22 billion in total revenue across payments, lending, banking and cards, and they expect this market to more than double to $51 billion by 2026. The transaction value of embedded finance will surge from $2.6 trillion to $7 trillion by 2026, or over 10% of total U.S. transaction value. The greatest market impact may be seen in B2B payments where estimates are for the market to reach $33.3 trillion by 2026.
Our focus for 2023 is to not only support this trend, but lead it, providing a payment platform that combines features of payments and banking providing demand- and supply-side payment rails, but also offers embedded features of modern banking like escrow funds but faster and with less friction than a bank.
Very much in line with our vision, McKinsey also noted that small businesses starting up today may never interact with a conventional bank. By logging into their eCommerce, or, in our terminology, a unified commerce platform, they can open a deposit account, order a debit card, and meet most of their financing needs through one single seamless, convenient and easy-to-use customer experience.
At Priority in 2023, we are building with intention toward the convergence of payments with embedded banking by offering a single platform to collect, store and send money that can quickly modernize legacy platforms and accelerate our partners’ effort to monetize payments.
Enablers, like Priority, that take the hassle out of embedded finance for platforms through easy integrations and great servicing will be in a premier position this year to enable commerce through a full suite of services, including some regulatory oversight, compliance, origination, and fulfillment.
As consumers and business continues to reconcile rising interest rates and the impact of inflation manifesting in a slow/no growth economic environment, we believe the adoption of bundled payments and banking solutions that drive operating efficiency reduce cost and eliminate risk bets building new technology will become table stakes of a modern commerce that ISVs and business customers expect, increasing their customer loyalty in turn.
We are determined and committed to continue leading this emerging trend that others are just now recognizing.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
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