Should I Add Banking to My Dating App? How Financial APIs are Transforming App-Based Business Models

Photo of Paweł Stężycki

Paweł Stężycki

Mar 18, 2022 • 8 min read
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How much would you pay for the chance to meet your true love? In recent years, love seekers around the world have realized that they face a choice: use free dating apps and websites with limited services, or pay for premium features that promise a better dating experience.

While it may seem counterintuitive, paid apps increase the chances of finding the perfect partner for life — not just for dates. They offer detailed personalization and advanced search criteria for the partner you want. And most importantly, people who pay to use dating apps take their search more seriously.

In addition to the popular paid subscriptions, some apps now offer other in-app paid extras such as virtual winks, hugs, and kisses. Hinge, for example, recently added a feature that indicates your strong interest in a selected person — "roses." App users can only send one free rose each week, but you can buy more — or even a whole bunch of them! The most popular option is a “Six pack of roses," and yes, people really do pay for them, especially because payment is extremely easy — just one click. You don’t even notice you’ve just spent $3.99.

What is embedded finance?

This example shows that for a successful dating app — or any app with paid features — you need an easy-to-use payment system that doesn’t require redirection to a third-party website for authorization. A system that will naturally increase conversion, and allows a seamless user flow without the need to enter credit card details for each transaction.

In fact, an embedded payment system is just a starting point. Depending on the product, you may need other financial instruments such as credit options, insurance, ID verification, extended warranties, or deferred payments. In other words, you need embedded finance.

Embedded finance refers to financial services that are integrated into consumers' everyday experiences through non-financial products and services. Customers do not need banks to use banking products. For example, if you choose the Buy Now, Pay Later option offered by Klarna when shopping at H&M, you’re using a financial credit product embedded in a non-financial shopping experience.

APIs as the future of Financial Services

APIs (application programming interfaces) have long been known for making tech projects easier. They allow a software program to communicate with other programs. They make integration easier and value for the user soars.

We make use of APIs every day without realizing it. APIs can be used by almost any industry today — not just technology companies. Actually, APIs have even greater value outside IT. Finance and insurance are heavily regulated industries and it’s hard to imagine companies setting up banks just to add a feature in their app. With APIs this all becomes possible — by using an API, apps can offer more value by embedding 3rd party financial solutions.

"Any company that wants to invest in user engagement and user experience should focus on financial services integration,"

says Roland Folz, CEO of Solarisbank, a leading fintech in banking-as-a-service. There are numerous examples of many companies already doing so. Let’s take a closer look at them.

Embedded finance examples

Recall the example of a bouquet of roses in Hinge? If users had to pay for each rose individually with a credit card, at least half of them would give up before completing the entire process.

Payment is often a key pain point in any shopping experience.

So, the more "invisible" the payment is, the higher the chance of conversion.

Effective embedded financial solutions address the needs of the customer — whether it's a loan, installment payments, insurance, or something else. The most common use cases for financial APIs are:

1. It started with (embedded) payments…

Remember how you once ordered a cab? You had to call (sometimes several) numbers and get the dispatcher to find a free car for you. Then you had to use an ATM to get cash. Even with the increasing popularity of credit cards, the payment process still required you to take out your wallet or card and hand it to the clerk or taxi driver, or type the numbers into an app. How annoying! How painful it was to watch as you said goodbye to your hard-earned money.

Well, that does not happen anymore — or at least not as often — especially when your ride is with Uber, Bolt, or Lyft. That's because these companies have integrated payment into their apps, making the transaction almost "invisible."

And transportation companies are not alone. Starbucks was one of the pioneers of mobile payments in the US, but now we are seeing a number of coffee chains where tapping or scanning your loyalty card is used both for paying and collecting bonus points.

Another example is WeChat — a popular Chinese app that started as a messaging platform similar to WhatsApp. Now, WeChat offers a range of financial services, including scanning a QR code to pay for a product or service, and it is currently the dominant mobile payment network in the Chinese market. In the US, Venmo has a similar feature that allows users to scan a QR code to find other users and send payments quickly.

Gojek — the Southeast Asian giant — positions itself as a "super app" that covers all on-demand needs — food delivery, transportation, and digital payments. Thanks to Visa's investment in 2019, Gojek's financial services division "GoPay" is one of the company's fastest-growing businesses. Another example from the same region is Grab — the company that started as a ride-hailing service and now also offers food delivery and embedded financial services such as payments, insurance, investments, loans, and credit. All of them are accessible to users without leaving the Grab ecosystem.

2. Why pay now, do it later (Embedded Lending)

Financial APIs have changed the way we borrow money. In the past, we needed a bank or a credit card to take a loan. Today, even companies that are not financial service providers can offer convenient credit options at the point of purchase.

One of the most visible forms of embedded lending is Buy Now, Pay Later (BNPL), offered by companies such as Klarna, Affirm, Twisto, and Afterpay. They all allow customers to postpone payment or pay in several installments. In this way, consumers gain access to a wider range of products and avoid the fees set by credit card issuers. BNPL users especially value ease of payments, more flexibility, no interest, and a simple approval process that allows them to make purchases that would otherwise not fit into their budget.

3. Embedded insurance

Embedded insurance options are nothing new, but APIs have facilitated their proliferation in digital marketplaces. Their biggest advantage is that they can be offered contextually exactly when people feel they need it and just a few mouse clicks away.

We may have grown accustomed to insurance options embedded in travel booking platforms, but there's more to come.

Sports, product, pet, and health insurance will likely become more contextual as embedding them in your favorite apps becomes easier over time.

What’s in the future?

The transformation toward an API-fuelled economy and platform business model seems to be on a stable track. With an estimated market value of over $138 billion in 2026, it’s clear that it’s not just a financial fad, it’s the future. Preferences for contextuality will make embedded financial services standard within a number of daily apps.

By embedding financial services into buying journeys, companies will create new revenue streams. On the other hand, traditional financial services businesses can offer products to new customer groups without marketing costs, which will boost new business models.

Finally, embedded finance will mean a new era of partnerships. Last year the neobank N26 teamed up with Tinder to “help users get to know new people safely.” When signing up through the N26 app, users could enjoy 50% off Tinder Gold. Considering banks run thorough verification of their customers, this partnership adds another layer of security to Tinder’s system. A great example of how embedding banking can make dating safer.

Photo of Paweł Stężycki

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Paweł Stężycki

Senior Fintech Innovation Consultant at Netguru
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