Visa and Mastercard expand ties to tap growth in the embedded finance sector in 2023

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The financial services landscape has transformed significantly over the last few years owing to technological advances worldwide. Embedded finance has emerged as the next big thing in the financial services sector, which is also driving financial inclusion at a rapid rate, especially in regions where consumers and businesses have been long left out of the formal banking system.

Going forward, the embedded finance industry is projected to record strong growth, on the back of increasing innovation in the sector. According to PayNXT360 estimates, the global embedded finance market is projected to reach US$267.5 billion in 2023 and US$862.17 billion by 2029. To tap into this high-growth market, both Visa and Mastercard are expanding their ties in 2023.

• Visa, for instance, announced that the firm had entered into a strategic collaboration with United Kingdom-based firm Weavr in June 2023. The alliance aims to drive the adoption of embedded finance offerings among B2B software-as-a-service providers. For Visa, this partnership is part of the firm’s strategy to further penetrate into the fast-growing embedded finance sector. For Weaver, the collaboration is part of the strategy to extend its plug-and-play embedded finance solutions to more businesses across regions.

In the embedded finance sector, Weavr is one of the leading names in the European market. The firm, in March 2023, entered into an acquisition deal with the B2B Open Banking platform Comma Payments. With this acquisition, Weavr became the first firm to bring together banking-as-a-service and open banking solutions for B2B applications, enabling the firm to further expand its presence in the embedded finance space.

Over the last 12 months, Weavr reported a strong growth of more than 340%. After raising US$40 million in its Series A funding round in 2022, the firm tripled its user base and a significant surge in transactions. The collaboration with Visa will further aid the growth trajectory for Weavr from the short to medium-term perspective, owing to the strong business presence of Visa in the global market.

• Like Visa, Mastercard also expanded ties with Fabrick to develop embedded finance solutions for fintech firms, financial institutions, and other businesses in Europe. The strategic collaboration, agreed in May 2023, builds on top of the existing relationship between the two firms. Notably, Mastercard had also acquired a minority stake in Fabrick.
• For Mastercard, the extended partnership with Fabrick will enable the firm to provide more digital payment solutions to businesses worldwide. For Fabrick, the strategic alliance will enable faster growth and the addition of new solutions to its services. The collaboration with Mastercard comes two weeks after Fabrick acquired Judopay in the United Kingdom.

With the demand for embedded finance services growing among consumers as well as businesses, these strategic collaborations with well-established players like Weavr can enable Visa and Mastercard to drive significant growth in the sector.

Amid the growing competition in the space, coupled with these strategic collaborations, other financial services providers are also launching embedded finance products in the markets in 2023.

• SAP Fioneer, for instance, launched a B2B embedded finance platform in March 2023. The platform will enable SAP users and financial service institutions to connect and develop solutions catering to their specific needs.
• Maast, another financial services firm, announced the launch of embedded finance solutions in April 2023. The solution is specifically targeted toward software developers who are seeking to create a new revenue stream for themselves.
• TransferMate, in February 2023, announced the launch of an embedded finance solution that facilitates cross-border payments. The solution will enable banks and financial institutions to build payment products for their customers.

Apple is also making big strides in the embedded finance space over the last few quarters. The firm, initially launched a buy now pay later service for its Apple Pay users and more recently launched a high-yield savings account for its Apple Card users. The services are gaining increasing traction among consumers in the United States.

From the short to medium-term perspective, Apple is expected to launch these embedded financial services to its global user base. As Apple expands its presence rapidly through enhanced offerings for its Apple Card users, the tech giant is emerging as a tough competition for payment giants like Visa and Mastercard.

Consequently, PayNXT360 expects Visa and Mastercard to forge more such alliances and expand their ties in the sector, as they seek to strengthen their position in the embedded finance space. Going forward, PayNXT360 also expects other financial service firms to launch innovative embedded finance products and platforms in the global market, accelerating the competitive landscape over the next three to four years.

To know more and gain a deeper understanding of the global embedded finance, click here.