As operators, advisors, and investors at the heart of fintech, we have a unique vantage point that gives us an edge.
We’re not just bystanders; we’re in the thick of it.
Our growth consultancy, Fiat Growth, has worked with over 200 clients, helping them drive more than $1.5 billion in revenue over the last five years. Our marketplace of 200+ advisors, Fiat Advisors, has guided early-stage companies, giving us a front-row seat to the future. Lastly, our venture firm Fiat Ventures has invested in 35+ of the markets most innovative fintech firms.
So, what do we see from this perch? We see where the puck is heading.
The evolution of embedded finance is something we’ve been tracking since our early days at SoFi, Chime and in working with some of the markets largest fintech firms.. But while the fintech landscape has largely been shifting from consumer focused businesses to B2B models, something new is emerging.
A wave of innovation is reshaping innovation both within financial services and adjacent industries. It’s a wave that’s part of a broader trend, including some of the ten macro and micro trends we’ve identified in our 2024 Market Trends Report.
But there’s one trend that’s particularly compelling, and it’s about to redefine how companies engage with their customers: embedded rewards.
Embedded Rewards: Not Just a Buzzword
Let’s be clear—embedded rewards aren’t just a fancy term we throw around at conferences. They’re a game-changer. We’re talking about taking loyalty programs, integrating them directly into everyday financial transactions, and turning them into something that genuinely adds value to the customer experience.
Companies like Bilt Rewards are already revolutionizing this space, turning routine rent payments into opportunities for rewards. It’s not just clever; it’s transformative. Others like Acre use a similar strategy to provide rewards and benefits to homeowners who pay their mortgages on time. These companies make rewards a seamless part of the user experience, driving retention without any extra effort from the customer.
We’ve seen wave after wave of gamification strategies to hook users - in financial services, a 5% increase in customer retention correlates with a 25% increase in profit. Loyalty programs aren’t small either. In the US alone these types of programs are anticipated to increase from over $31 billion in 2021 to reach over $56 billion by 2026 at a CAGR of 12%.
While rewards aren’t new, the landscape is rapidly shifting. The next wave can be largely divided into two categories; rewards and incentives.
Rewards are celebratory milestones throughout a customer journey that mark an objective that’s been reached.
Incentives, while similar, are smaller benefits that push users in a particular direction or behavior.
While both strategies are meant to promote engagement, fintechs use each of these techniques to nudge users forward and to engage with certain products and brands.
The Retention Factor
Customer retention is the name of the game in fintech. You know this, I know this.
Acquiring a new customer is expensive, and losing one is painful. Embedded rewards create a continuous loop of value, keeping users engaged for the long haul. We’re not just talking about points or badges here; we’re talking about personalized rewards that feel tailor-made for each user. With AI and machine learning, these rewards can be customized to individual behaviors and preferences, turning financial services from a mere utility into an indispensable partner.
For example, companies like KashKick provide a rewards platform to help underserved and financially conscious consumers earn or save money by presenting them with various products and services that can address their needs.
Behavior Modification with a Side of Rewards
Now, let’s talk about behavior. Embedded rewards aren’t just about making customers feel good; they’re about nudging them in the right direction. Want your users to save more? Invest smarter? Engage more frequently? Embedded rewards can do that.
They’re a subtle yet powerful tool for encouraging the behaviors that benefit both the user and the platform. This isn’t just about transactions; it’s about transforming how people interact with their money.
Competitive Edge in a Crowded Market
In a crowded market, standing out is everything. Embedded rewards give fintech companies a unique edge. They offer a value-added experience that competitors might overlook. This strategy isn’t just for the sexy, cutting-edge startups; it’s for the “unsexy” but vital sectors that keep the financial world turning.
Not every organization has the resources to build out their own internal loyalty programs, so there is a wave of emerging fintechs who are building embedded solutions that others can use.
For example, companies like Wildfire are enabling businesses to build their own customized rewards platforms, fostering ecosystems of engagement without requiring them to reinvent the wheel. Now even large incumbents like Visa, RBC, Acorns, Citi and Microsoft can start to compete with the most nimble rewards platforms.
Fueling Growth
At the end of the day, embedded rewards are about growth—sustainable, scalable growth.
By boosting retention, encouraging positive behaviors, and creating a differentiated offering, fintech companies can significantly enhance their revenue streams. We’re talking higher transaction volumes, increased customer lifetime value, and more effective cross-selling. This is how you build a business that not only survives but thrives.
The Future of Fintech Is Embedded
So, where does this leave us? Embedded rewards aren’t just a trend; they’re the future of fintech.
Whether you’re a disruptor looking to shake things up or a legacy player trying to stay relevant, integrating rewards into your core offering is essential. At Fiat Ventures, we believe that the future of fintech is about creating value in every transaction, and embedded rewards are the key to unlocking that future. The landscape is shifting, and we’re not just watching it happen—we’re making it happen.
Are you ready to join us? We’d love to hear from you if so.
Comments