TLDR;
Community banks are rapidly embracing embedded finance, with 60% considering it "extremely important" and over half actively evaluating banking-as-a-service capabilities. They're drawn to the opportunity to create new revenue streams through payment processing and fee generation, while leveraging their local market knowledge to move faster than larger institutions—implementing solutions in weeks rather than months. The main hurdles are compliance requirements (particularly consumer protection and data sharing) and updating legacy tech systems to be API-ready. For platforms, this creates a significant partnership opportunity, as community banks actively seek compliance-ready, API-first solutions, and platforms that successfully integrate financial services typically see 2-5x revenue increases per user. With 87% of SMEs struggling with late payments and spending hours weekly on payment reconciliation, there's a clear market need that embedded finance partnerships between community banks and platforms can address.
Community banks are increasingly adopting embedded finance solutions, with recent data showing significant momentum in this space. For platforms considering financial services integration, understanding this trend can inform partnership strategies and product development decisions.
Current State of Community Bank Adoption
According to Treasury Prime's recent survey of over 300 community and regional banks:
Nearly all community bank leaders view embedded finance integration as important for long-term growth
60% consider embedded finance "extremely important"
Over half are actively evaluating banking-as-a-service (BaaS) or embedded banking capabilities
These numbers indicate a shift in how community banks approach financial technology partnerships and service delivery.
Why Community Banks Are Adopting Embedded Finance
Community banks bring several advantages to embedded finance partnerships:
Local Market Knowledge Community banks understand their local markets deeply, allowing them to assess partnership opportunities quickly and make decisions faster than larger institutions. This agility means they can move from concept to implementation in weeks rather than months.
Multiple Revenue Objectives Banks are pursuing embedded finance for various strategic goals:
Creating new revenue streams through payment processing
Acquiring low-cost deposits via fintech partnerships
Generating fee revenue from embedded transactions
Enhancing customer experience through integrated services
Flexible Implementation Banks can tailor embedded finance solutions to their specific needs. Some focus on deposit growth, while others prioritize fee revenue or client acquisition based on their size and regulatory requirements.
Implementation Challenges and Solutions
Compliance Requirements Key compliance considerations include:
Consumer protection law compliance (38% of survey respondents cited this as a concern)
Open-banking and data-sharing compliance (37% of respondents)
Risk management throughout the program lifecycle
Successful implementations require treating embedded finance as a distinct business line with dedicated compliance frameworks.
Technology Infrastructure Common technical challenges include:
Legacy systems that aren't API-ready
Need for real-time data exchange capabilities
Policy updates to support digital-first approaches
Removal of incompatible requirements like physical signatures
Best Practices for Embedded Finance Implementation
Based on industry experience, successful embedded finance programs typically follow these practices:
Partner Evaluation
Verify fintech partners are compliance-ready from day one
Ensure partners have adequate financial backing
Check for proven integration capabilities
Phased Approach
Plan for multiple partnerships over time
Set realistic launch timelines
Start with core functionality before expanding
Operational Readiness
Update policies for digital banking
Establish API integration standards
Create dedicated support teams
What This Means for Platforms
For platforms serving SMBs, the community bank trend creates opportunities:
Partnership Potential Community banks actively seek technology partners who can provide:
Compliance-ready solutions
API-first architecture
White-labeled capabilities
Ongoing technical support
Market Opportunity With 87% of SMEs experiencing late payments and spending an average of 3.6 hours weekly on payment reconciliation, platforms that integrate financial services can address real business pain points while creating new revenue streams.
Revenue Impact Platforms implementing embedded finance typically see:
Higher user retention rates
Additional revenue from payment processing (0.1-2% per transaction)
Margins from financial services (2-8% for working capital products)
How Monite Supports Embedded Finance
Monite's API platform enables both financial institutions and platforms to launch embedded finance solutions quickly:
Fast Integration: Launch AR/AP automation in 2 weeks versus 2+ years for in-house builds
Compliance Built-in: Regional tax compliance for 35+ countries included
White-labeled Solution: Everything appears under your brand
Modular Approach: Start with invoicing, add payments, then expand to full automation
Our platform handles the complex technical and compliance requirements, allowing you to focus on serving your clients.
Getting Started
Whether you're a community bank looking to offer embedded finance or a platform wanting to add financial services, the key is starting with the right foundation. Consider:
Your strategic objectives (deposits, fees, or customer acquisition)
Technical readiness and API capabilities
Compliance requirements for your market
Partnership evaluation criteria
Next Steps
Ready to explore embedded finance for your platform? Monite helps businesses launch robust AR/AP automation with integrated payments and accounting synchronization.
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