Author: Pedro Silva, co-founder & CEO, Alviere
The conversation around embedded finance has shifted. More and more companies are looking at their businesses and understand there's a way to embed financial services into their business that will provide better service to their customers, as well as generate new revenue streams in their own core business.
Here's where I see the market heading.
The education gap is closing
Early days of embedded finance showed how things should be done and how things should not be done. Banks and financial institutions now embrace the new models more effectively and safely. They also understand the right level of oversight that is required within their own institutions to bring these financial products to market.
Four to five years ago, companies that came to us needed a lot of education around why you should have a financial product. If you're a telecommunication company or you're a marketplace, or an airline, why should you embed a financial product into your core business when financial services is not what you do?
What we see today is less education is required. Companies come to us with the right questions, with the right asks, and with the right understanding of what it takes to bring a financial product to market. And I think that's a very positive sign of what's going to happen from now on.
The invisible infrastructure
What’s important to understand about embedded finance is that the financial product being provided to the end consumer, or to the end business, is perceived as a product from the brand that is offering it. For example, if we develop a co-branded debit card for an airline, the cardholder doesn't think about the embedded finance provider behind it and powering it. They think about the airline and as such, the quality of the financial service reflects on that brand.
The questions become: Does the card work? Is the visibility what I would expect? Does this company communicate well with me? The financial product needs to be seamless and flawless at all times. That is not only the expectation of the consumer , but it is also the expectation from the brand. We understand the weight of that responsibility, and provide a flawless customer experience every single time.
What's still holding companies back
When companies think about financial products and solutions, they think regulation, accountability, liability, legal issues, complexity. All of that is true, but the advent of embedded finance brought something different to the market. The embedded finance providers — such as Alviere — take care of all that. We provide a regulatory framework, and ensure that everything is done in compliance. We take care of everything that comes with financial services, working directly with our bank partners to stay compliant with regulations for any financial product.
I think that's one of the big things, which is the task sounds too daunting when you think about bringing a financial product to market. When companies realize that there's a faster path today, that you don't have to embark on a three, four, five year transformational project. You can do it a lot easier using a provider that has both the operational experience and the regulatory accountability. That really changes things.
Once that is established, companies can start looking at, what will this financial product do for my company? How can I generate new revenue streams? How can I serve my customers better? And how can I be competitive when all my competitors are already providing financial services that their consumers, their buyers, their sellers like?
That really is the main element in the lack of, or slower, innovation, is the perceived complexity in deploying financial services.
Marketplaces: the opportunity is bigger than payouts
Marketplaces stand to gain a lot with financial services. In its purest form, a marketplace is really a place that brings together a buyer and the seller of a financial service. The first frontier, of course, was to be part of the payment flow, not only connecting the buyer with the seller, but also being part of the actual financial transaction. A buyer pays for that product or service directly on the platform.
Now, when you are in the middle of the payment flow, you now need to collect the payment from the buyer and then pass it on to the seller. The next frontier in marketplace payments is considering why the marketplace should pay the seller instantly. When platforms pay the sellers via a balance or a card to spend the money. One of the best products that you can offer a seller is a debit card, they don't have to wait for the payout to arrive at their bank, or pay an additional fee for it to arrive faster. Instant access to the funds is critical and the ability to immediately spend those funds with a card wherever they desire anywhere in the world is a powerful benefit.
This also creates better revenue streams for the marketplace. For example, when a card is swiped, the marketplace earns a portion of the interchange. That is an interesting mix that increases the revenue for the marketplace and it increases loyalty on the seller side. Sellers gravitate to platforms where their payment is faster or seamless or where they have more options to receive payouts. It's a very compelling way to increase revenue while at the same time increasing loyalty.
Co-branded debit cards are just the beginning. Once you are part of the financial flow for that seller, you can start providing different options. For example, a savings account, the money could earn interest as long as it stays in the platform. Sellers can start using those funds to buy within the platform with zero cost on the payment side. You can go into lending, for example, and knowing that the sales volume of a specific seller, it's predictable, and you control that volume that they will earn a certain income. The payout capability is where it starts, but really the possibilities are endless in terms of the financial products that marketplaces can provide.
Debit as a loyalty tool
Co-branded credit cards in the travel and hospitality industry have been around for a long time. And in many industries and sub-verticals within the industry, it's an important part of the revenue and the profitability of those companies.
Co-branded credit cards have one big issue, there are many people who don't qualify, whether it's their credit score or other risk factors. And then you have a high percentage of customers that are outside of your loyalty program.
With debit, without needing to have a credit card, customers are able to earn points or miles with the travel and hospitality company.
Also, what we see is that younger generations tend to prefer debit. The association of debt, the ability to be in control, a number of different factors, not only in travel and hospitality, but in every industry.
A debit card is a very different financial product than a credit card. One of the main differences is that you have to load or deposit funds into a debit account to spend it with a debit card. When you have deposits, that means that you have access to other sources of revenue, mainly of course, the ability to earn yield on those funds.
When it comes to travel and hospitality, the trend that we see is not, “Here's a debit card that has a savings component to it and your funds will earn more money.” Instead of that, the ability to hold deposits and by holding those deposits, consumers will earn more miles, more points with an airline, with a hotel, with a cruise line.
The Starbucks benchmark
Starbucks is definitely the gold standard when it comes to embedding financial products into a loyalty platform, and at the same time creating a very significant revenue stream and repeat sales effect. So by holding a balance at Starbucks, you have the convenience that you can order ahead or you can pay with your balance. You don't have to carry cash.
And for Starbucks, what that means is all that cash that is inside their app from the millions of users that they have can only be used to buy Starbucks coffee.
Starbucks' path was groundbreaking. They started many years ago, but the big difference today is that you don't have to spend all that time and money to get a similar product to market. Companies like Alviere can provide these services and can stand up these loyalty platforms with payments in months rather than years. And this is really a fundamental difference to what it used to be and what the world of embedded finance is today.
Pay-by-bank: The underutilized rail
There are many providers that have been implementing open banking-like capabilities, which help a lot in reducing the risk, cost, and process flows.
What’s evolving is how companies are dealing with fraud. You can't change the fact of how the rail works, and the ACH rail works only on standard business days, three times a day. So there's no way to execute and check a transaction if the payment is made on a Saturday morning.
What companies have been doing, and we do a lot, is building histories for our clients and for the transactions. Put quite simply, what this means is that if a client of ours is paying by bank using an ACH for the same account, or roughly the same amounts, in a repeated way, you can provide a better service to that customer because the return risk is a lot lower.
Using customer history, transactions, when payroll comes in, the type of income, the type of spend, and that helps build a profile of the client that will in turn allow you to make smarter business decisions, either promoting good users and also catching bad actors in the process. The more data exists, and the more companies use that data, the more efficient the processes will be and it will lower the fraud losses.
Move fast, break nothing
The companies that move in 2026 will have a head start on the ones still asking why. The infrastructure is proven, the regulatory path is clearer than it's ever been, and customer expectations around instant access to funds and seamless branded experiences are only going up.
The opportunity is there. The question is how fast you want to move.
