Embedded Finance Revenue Framework

How to use this framework: Score each of the 20 questions across 5 areas. Select the answer that most accurately reflects your current state. Your total score indicates whether your embedded finance financial management is Exposed, Developing, Proficient, or Excellent — with a maximum of 40 points.

Whether you offer embedded payments, lending, or accounts, this framework assesses your revenue model clarity, regulatory capital requirements, and partner economics. Embedded finance products introduce layered P&L complexity: revenue may flow as interchange share, SaaS fees, interest income, float income, or a blend — and each requires different accounting treatment, capital planning assumptions, and partner reporting obligations.

The CFO function in an embedded finance business carries a heavier compliance burden than a typical SaaS company. Regulatory capital adequacy, credit loss provisioning, and sponsor bank economics all demand rigorous financial management. This framework identifies where the gaps are most likely to create problems — either in day-to-day operations or in investor due diligence.

Area 1: Revenue Model Clarity

Revenue Model Clarity

Q1. Is revenue per embedded finance product type (e.g. payments, lending, accounts) defined, modelled, and reported separately in the management accounts?

2 — Fully in place: Each product type has a defined revenue model and its own P&L line; management accounts show revenue by product monthly with variance commentary. 1 — Partially in place: Revenue is tracked by product type but the model is not fully documented or consistently reconciled against actuals. 0 — Not in place: Embedded finance revenues are reported as a single line without product-level breakdown; the team cannot determine which products are contributing most.

Q2. Is the interchange income share from the card scheme or BaaS sponsor bank modelled explicitly, with monthly actual vs model reconciliation?

2 — Fully in place: Interchange income share is modelled from first principles (transaction volume × interchange rate × share %), reconciled monthly against sponsor bank or PSP statements. 1 — Partially in place: Interchange income is tracked but the model relies on PSP-reported totals rather than an independent calculation from transaction data. 0 — Not in place: Interchange income is not separately modelled; the business does not know how interchange contributes to its unit economics.

Q3. Is float income (interest earned on customer balances held in safeguarding or e-money accounts) tracked separately, with a policy for how it is recognised and allocated?

2 — Fully in place: Float income is tracked monthly, recognised in accordance with a documented accounting policy, and reported separately from fee-based revenue in management accounts. 1 — Partially in place: Float income is received and posted to P&L but has not been modelled separately or assessed for accounting treatment implications. 0 — Not in place: Float income is commingled with other interest income; its contribution to product profitability is not tracked.

Q4. Is the split between fee-based revenue (flat fees, SaaS charges) and spread-based revenue (interchange, interest margin) formally tracked and used in revenue quality analysis?

2 — Fully in place: Fee vs spread revenue is reported monthly; investor-facing materials explain the revenue mix and its implications for margin stability and rate sensitivity. 1 — Partially in place: The revenue types are understood conceptually but are not formally reported separately; the mix is not used in investor communications or margin analysis. 0 — Not in place: Revenue types are not segregated; all embedded finance income appears as a single P&L line without type analysis.

Assess whether your embedded finance or BaaS revenue model is structured for profitability. Score margin per product, partner economics, revenue share terms and the unit economics of distribution.

Area 2: Partner Economics

Partner Economics

Q5. Are revenue share agreements with distribution partners fully documented, with economics modelled at a partner level and monitored against contractual commitments?

2 — Fully in place: Revenue share terms are documented for each partner; a model calculates expected revenue share by partner monthly, reconciled against actual payments. 1 — Partially in place: Revenue share agreements exist but are not actively modelled; actual payments are reconciled only at contract renewal or audit. 0 — Not in place: Revenue share economics are not modelled; the business cannot readily calculate the net margin after partner revenue share for any given product.

Q6. Are the economics of the BaaS sponsor bank relationship fully understood, including the bank's take rate, minimum volume commitments, and any profit share arrangements?

2 — Fully in place: Sponsor bank economics are documented and modelled; the business knows its net margin after the bank's share and monitors volume commitments against actuals. 1 — Partially in place: The headline economics are understood but have not been modelled in detail; volume thresholds are not actively tracked. 0 — Not in place: Sponsor bank economics are not fully understood; the business cannot calculate its true margin net of bank fees and obligations.

Q7. Is the white-label margin (revenue minus all partner costs, infrastructure, and support costs attributable to the white-label channel) calculated and reported?

2 — Fully in place: White-label channel margin is calculated monthly with full cost allocation; the business knows the margin on each white-label partner and can identify which partnerships are profitable. 1 — Partially in place: Revenue per white-label partner is tracked but cost allocation is incomplete; true margin per partner is not known. 0 — Not in place: White-label economics are not calculated at a partner level; the business may be operating loss-making partner relationships without realising it.

Q8. Is a distribution partner P&L maintained for each significant partner, showing their contribution to revenue, associated direct costs, and net contribution margin?

2 — Fully in place: A partner-level P&L is produced for each significant distribution partner; the CFO reviews partner contribution margins quarterly and flags underperforming relationships. 1 — Partially in place: Some partner-level reporting exists but it covers revenue only, without attribution of direct costs to individual partners. 0 — Not in place: No partner-level P&L is maintained; all embedded finance revenue and costs are reported in aggregate.

Area 3: Capital & Liquidity

Capital & Liquidity

Q9. Is there a documented credit loss provision methodology for embedded lending products, with provisions reviewed at least quarterly by an appropriate owner?

2 — Fully in place: A credit loss provision methodology (e.g. expected credit loss under IFRS 9) is documented and applied; provisions are reviewed quarterly with an appropriate credit risk owner. 1 — Partially in place: Provisions are made for known bad debts but an expected credit loss methodology has not been formally adopted or documented. 0 — Not in place: No credit loss provision methodology exists; credit losses are recognised only when debts are formally written off.

Q10. Is a liquidity buffer maintained to cover potential claims against e-money float or payment float, sized in line with regulatory requirements and stress scenarios?

2 — Fully in place: A liquidity buffer policy is documented; buffer size is calculated against float obligations and stress tested; adequacy is reviewed monthly by finance. 1 — Partially in place: A liquidity buffer is maintained but sizing is not formally documented or stress tested against adverse scenarios. 0 — Not in place: No separate liquidity buffer is maintained for float obligations; the business relies on general operating cash to cover any shortfall.

Q11. Is capital consumption calculated by embedded finance product type, enabling the board to understand the capital efficiency of different product lines?

2 — Fully in place: Capital consumption (regulatory and economic) is allocated by product type; return on capital is calculated per product to support investment prioritisation decisions. 1 — Partially in place: Total regulatory capital is tracked but is not allocated to individual product lines; product-level capital efficiency is not assessed. 0 — Not in place: Capital requirements are managed at an entity level with no product-level attribution; capital efficiency by product is unknown.

Q12. Has the business modelled a stress scenario for its embedded finance products showing the capital and liquidity impact of a 30% increase in credit losses or a sudden outflow of customer funds?

2 — Fully in place: Stress scenarios are formally modelled; the board has reviewed the capital and liquidity impact and management actions are defined for stress conditions. 1 — Partially in place: Some scenario analysis has been performed but is not formally documented or regularly updated to reflect the current product portfolio. 0 — Not in place: No stress scenarios have been modelled for embedded finance products; the board has no view of downside capital or liquidity exposure.

Area 4: Regulatory Capital

Regulatory Capital

Q13. Is the minimum regulatory capital requirement for each embedded finance product calculated, documented, and formally monitored against the entity's available capital?

2 — Fully in place: Capital requirements per product are calculated using the applicable regulatory methodology; available capital vs requirement is reviewed monthly with board visibility. 1 — Partially in place: Regulatory capital requirements are broadly understood but not calculated at a product level; total entity capital adequacy is monitored but without product-level granularity. 0 — Not in place: Regulatory capital requirements have not been formally assessed for the embedded finance product set; the business may be under-capitalised for its activities.

Q14. Is there a documented capital buffer above regulatory minimum requirements, sized against the specific risk profile of the business and approved by the board?

2 — Fully in place: A capital buffer policy is formally documented; buffer size is calibrated to the business's risk profile; the board approves the target buffer annually. 1 — Partially in place: Some buffer above minimum exists but the sizing is not formally documented or risk-based; buffer adequacy is not regularly reviewed by the board. 0 — Not in place: No documented capital buffer policy; the business may be operating uncomfortably close to minimum regulatory capital requirements.

Q15. Is a forward-looking capital planning horizon maintained (minimum 12 months), incorporating projected growth, product launches, and regulatory changes?

2 — Fully in place: A 12-month+ capital plan is maintained and updated quarterly; the plan incorporates growth assumptions, new product capital requirements, and known regulatory changes. 1 — Partially in place: Current capital adequacy is monitored but a forward-looking capital plan beyond the next quarter is not formally maintained. 0 — Not in place: Capital planning is reactive; the business does not model future capital requirements and may face capital shortfalls as volumes grow.

Q16. If the business is regulated as an e-money institution or payment institution, has an ICARA (Internal Capital Adequacy and Risk Assessment) or equivalent been prepared and reviewed?

2 — Fully in place: An ICARA (or equivalent ICAAP) has been prepared, reviewed by senior management, and is updated at least annually; it informs the capital planning process. 1 — Partially in place: An ICARA has been drafted but is not regularly updated or fully embedded in the capital planning process. 0 — Not in place: No ICARA or equivalent has been prepared; the business does not have a formal internal capital adequacy assessment.

Area 5: Financial Reporting

Financial Reporting

Q17. Is a separate embedded finance P&L produced within the management accounts, enabling the board to assess the standalone financial performance of the embedded finance business?

2 — Fully in place: An embedded finance P&L is produced monthly with full revenue, direct costs, and allocated overheads; it is presented to the board alongside the consolidated P&L. 1 — Partially in place: Embedded finance revenue is reported separately but costs are not fully allocated to produce a standalone contribution margin or P&L. 0 — Not in place: Embedded finance performance is not separated in management accounts; the board cannot assess the financial performance of this segment independently.

Q18. Is a partner reporting pack produced for significant distribution or BaaS partners, covering revenue, transaction volumes, and relevant financial metrics?

2 — Fully in place: A partner reporting pack is produced for each significant partner; it covers agreed KPIs, is delivered on schedule, and enables partners to verify their revenue share calculations. 1 — Partially in place: Partner reporting exists but is inconsistent in content or timing; partners may rely on their own data rather than the business's reports for revenue reconciliation. 0 — Not in place: No structured partner reporting pack is produced; partner relationships rely on informal communication about financial performance.

Q19. Is a regulatory capital report produced monthly showing actual capital vs minimum requirement and buffer, with a commentary on any material movements?

2 — Fully in place: A regulatory capital report is produced monthly; it shows actual vs required capital, buffer position, and key drivers; the board sees this as part of the standard management pack. 1 — Partially in place: Regulatory capital is calculated and monitored but is not formally reported to the board as a standalone item within the monthly management pack. 0 — Not in place: Regulatory capital is not regularly reported; the board does not have routine visibility of the business's capital position.

Q20. Does the board receive a product-level P&L for each embedded finance product, including return on capital metrics, at least quarterly?

2 — Fully in place: The board receives a product-level P&L quarterly, including return on capital for each product; this informs strategic investment decisions across the product portfolio. 1 — Partially in place: Product-level revenue is reported to the board but return on capital is not calculated; the board does not have a full economic view of each product. 0 — Not in place: The board does not receive product-level P&L reporting; embedded finance product economics are not visible at board level.

Your Score

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Embedded Finance Revenue Framework

Area 1: Revenue Model Clarity

Revenue Model Clarity

Area 2: Partner Economics

Partner Economics

Area 3: Capital & Liquidity

Capital & Liquidity

Area 4: Regulatory Capital

Regulatory Capital

Area 5: Financial Reporting

Financial Reporting

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