Why Every Merchant Will Become a Financial Services Provider

The Parallel That Should Worry Every High-Ticket Merchant

In the late 1990s, the dominant objection among established physical retailers to selling online was entirely rational: we are retailers, not technology companies. Building and maintaining e-commerce infrastructure is not our core competency. The argument was reasonable. It was also catastrophically wrong. The merchants who treated e-commerce as someone else's problem ceded customer relationships, data, and ultimately market share to those who treated it as their own.

The embedded finance transition follows the same pattern - with one important difference. The e-commerce shift took fifteen years to become unavoidable. The embedded finance shift, accelerated by the maturity of Banking-as-a-Service infrastructure and the structural failures of third-party lending models at high ticket values, is moving faster.

Within five years, every merchant selling products above €1,000 will offer some form of embedded financial service - whether they have decided to or not. Not because it is trendy, but because the economics of customer acquisition, retention, and margin protection will demand it. The merchants who move early will capture disproportionate market share. The merchants who wait for the argument to become undeniable will find themselves in the same position as the physical retailers who discovered e-commerce in 2010.

The Thesis

Embedded finance is not a product category or a technology upgrade. It is a structural shift in where the customer relationship lives. For merchants selling high-ticket products, the question is not whether to participate in this shift - it is how quickly to move, and which components to embed first. The merchants who treat financial interactions as someone else's job are not staying neutral. They are actively outsourcing their most valuable commercial asset: the ongoing relationship with a committed customer.

What Embedded Finance Actually Is - And Is Not

Embedded finance is the integration of financial services - payments, savings, lending, insurance - directly into non-financial platforms at the point of need. The customer never leaves the merchant's environment. There is no redirect to a bank, no separate app, no friction.

This is not the same as "offering financing at checkout." That is a narrow, decades-old practice. Embedded finance is broader: it means the merchant's platform becomes the financial interface. The store is the bank. The loyalty programme is the savings account. The checkout is where the customer manages their financial relationship with a brand they trust - not where they are handed off to Klarna.

The infrastructure enabling this has matured dramatically. Open Banking APIs, Banking-as-a-Service providers like Railsr and Solaris, and regulatory frameworks like PSD2 in Europe have lowered the barrier to entry to the point where any business can embed financial services without becoming a regulated financial institution. A furniture brand can offer a savings product to its customers today without a banking licence, a compliance team, or a multi-year technology project. The complexity is handled by infrastructure partners behind the scenes. What remains is the commercial decision.

According to Bain & Company, the embedded finance market is projected to exceed $7 trillion in transaction value by 2026 - roughly doubling from 2021 levels. Lightyear Capital projects the embedded finance revenue pool to reach $230 billion by 2025. The market is not forming. It is already here.

Three Forces Making This Inevitable for High-Ticket Merchants

Three structural forces are converging simultaneously. Each is significant independently. Together, they make embedded finance not a strategic option but a commercial necessity for any merchant selling above €1,000.

Force 1 - Customer expectations have permanently shifted

Consumers have been trained by the most sophisticated platforms in the world - Uber, Shopify, Amazon, Revolut - to expect financial services embedded in the products they already use. The benchmark for a payment or savings experience is no longer your competitor's checkout. It is the frictionless, contextual, one-tap experience set by platforms that have spent billions optimising it.

A McKinsey survey found that consumers increasingly expect financial services to be available within the platforms they already use - not as separate experiences requiring separate apps and separate logins (McKinsey, 2022). For high-ticket merchants specifically, this expectation compounds the existing psychological barriers to purchase. A customer navigating a complex, high-stakes buying decision does not want to be redirected to a third-party financial platform at the critical moment. They want the financial interaction to happen inside the trusted environment where they made their decision.

The merchants who meet this expectation will feel frictionless. The merchants who do not will feel like they are adding a step.

Force 2 - The cost of third-party dependency is becoming a strategic problem

BNPL providers charge merchants 5-8% per transaction - a fee that is manageable on a €500 impulse purchase but becomes a genuine margin problem on orders above €1,000. At high ticket values, this is not a transaction cost; it is a strategic cost that compounds across every sale. And the fee is only part of it: the post-purchase relationship, the payment reminders, the cross-sell opportunities, and the customer data all belong to the BNPL provider, not the merchant. We break down the full fee comparison - SNBL vs BNPL vs EMI vs credit - in The Real Cost of How Your Customers Pay.

Force 3 - The technology barrier has effectively collapsed

Five years ago, embedding financial services required building a fintech team, navigating complex regulatory frameworks independently, and investing capital that most non-financial businesses could not justify. Today, API-first BaaS providers offer modular financial infrastructure - stored value, goal-based savings, payment rails, KYC compliance - that can be integrated in weeks rather than years.

The capital and time requirements to embed financial services have dropped by an order of magnitude (Bain & Company, 2022). This changes the calculus entirely. The question is no longer can we afford to build this? It is can we afford not to? - and that is a question with a different answer at every price point above €1,000.

What "Becoming a Financial Services Provider" Actually Means

The phrase sounds more dramatic than the reality. No one is suggesting that a jewellery retailer should apply for a banking licence or that a furniture chain should build a payments processing team. What it means in practice is narrower and more achievable.

It means that the financial interaction - the moment when a customer commits to working toward ownership of a product - happens inside the merchant's ecosystem rather than being outsourced to a third party. It means the merchant sets the terms, the incentives, and the experience. It means customer data about savings behaviour, purchase intent, and financial readiness belongs to the merchant, not to a BNPL provider's algorithm.

The three components that matter most for high-ticket merchants are not equally mature or equally urgent.

Embedded payments are table stakes. One-click checkout, stored payment methods, and integrated payment flows are no longer differentiators - they are minimum requirements. The interesting frontier here is automated recurring payments: standing orders, scheduled transfers, and contribution automations that remove the customer from the active payment loop and make saving feel passive.

Embedded lending is the most visible component and the most problematic for high-ticket retail. BNPL and point-of-sale credit work well for low-to-mid ticket impulse purchases. For aspirational purchases above €1,000 - where customers need time, planning, and psychological preparation - the debt model creates friction rather than removing it. The credit check excludes customers. The interest charges inflate the true cost. The lender takes the relationship. For high-ticket merchants, the limitations of embedded lending are structural, not incidental.

Embedded savings is the least explored category and, for high-ticket retail specifically, the most promising. It enables customers to allocate money toward future purchases within the merchant's ecosystem - purposeful, incentivised, and entirely debt-free. It is also the category that creates the richest ongoing engagement: a customer saving toward a product over weeks or months generates first-party intent data, milestone interactions, and cross-sell opportunities that no other payment mechanism provides. We explore this in depth in the next article in this series.

The Merchant Who Waits: A Realistic Scenario

Consider a high-ticket furniture retailer running a showroom and an e-commerce site. Today, their financial tools are: a BNPL integration at checkout, a bank transfer option, and a credit card processor. Conversion online is 1-2%. In-store it is higher, but every sale routed through BNPL costs €150-400 in fees. Customer data from the purchase belongs to the BNPL provider. There is no mechanism for the customer who browses, cannot afford the full price today, and leaves - they are gone, with no path back that the merchant controls.

Five years from now, their competitor - who embedded a savings-based purchase mechanism two years earlier - has a different business. They capture customers at the consideration stage, not just at checkout. Their customer acquisition cost for SNBL-initiated purchases is a fraction of their paid media cost. Their post-purchase cross-sell rate is higher because they maintained the relationship through the savings journey. Their margin per transaction is 5-7% better because they replaced BNPL fees with a merchant-controlled financial tool. And they have two years of first-party purchase intent data that their waiting competitor does not.

This is not a hypothetical scenario. It is the same arc as e-commerce, playing out in a different domain, at a different speed.

The Counterargument - and Why It Does Not Hold

The objection is consistent and reasonable: "We are a retailer, not a fintech. This is not our core competency. We should focus on what we are good at."

This argument fails for the same reason it failed in e-commerce. The question is not whether financial interactions are your core competency - it is whether the customer's financial journey belongs in your ecosystem or someone else's. Building a banking licence is not the implication. Owning the customer relationship is.

The BaaS infrastructure layer exists precisely to make this separation possible. A furniture brand does not need to understand KYC regulation to offer a savings product. An infrastructure partner handles that. What the furniture brand needs to understand is that the customer who saves toward their sofa for three months, receives milestone rewards, and completes the purchase with their own money is a fundamentally different commercial relationship than the customer who clicks "pay with Klarna" and is immediately re-categorised as Klarna's customer.

The merchants who accept the embedded finance argument reluctantly - who integrate the minimum, late, without conviction - will get the minimum return. The merchants who treat it as a genuine commercial strategy, move early, and build the customer relationship around it will get what the early e-commerce movers got: a compounding advantage that is very difficult for late movers to close.

Sources & Further Reading

• Bain & Company - "Embedded Finance: What It Takes to Prosper" (2022)
• McKinsey - "The Rise of Embedded Finance" (2022)
• CB Insights - "Buy Now, Pay Later Market Report"
• Simon-Kucher - "Embedded Finance: The Next Growth Opportunity" (2023)
• Afterpay / Block - Investor Reports and Merchant Fee Disclosures
• Klarna - Merchant Pricing Documentation
• Lightyear Capital - "The Embedded Finance Opportunity" (2021)