Embedded Finance: Integrating Financial Services into Non-Financial Products and Platforms

Published on 23 Mar 2024

embedded finance

Embedded finance changes the way financial services are provided and used in a big way. In the past, banks and other financial institutions sold financial goods and services independently. However, as digital technology and APIs (Application programming interfaces) become more popular, financial services are added to more non-financial platforms and goods, like software apps, ride-sharing apps, and e-commerce websites. 

In fact, McKinsey & Company suggests that 50% of the revenue pools in the banking industry could potentially come from embedded finance solutions. This blog post will discuss embedded finance, what it means for companies and customers, and how it can help the financial industry be more innovative and improve things.

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How to Understand Embedded Finance

Embedded finance is when financial services are built into non-financial goods and platforms. This allows banking and payment functions to mix in with normal exchanges and transactions. Customers can easily and naturally get financial services through this combination without having to deal with traditional financial institutions separately.

Take, for instance, a ride-sharing app that lets users pay for rides directly in the app using a credit card or bank account tied to the app. In this case, the ride-sharing app works as a financial middleman, making it easier for riders and drivers to pay each other using current banking systems.

Key Components of Embedded Finance

Embedded finance includes many different financial services and features built into goods and systems that aren't financial. Some common parts are the following:

  1. Transactions: Embedded finance lets non-financial apps handle embedded payments smoothly, so users can buy things, send money, and pay bills, all without leaving the app.
  2. Lending and Credit: Platforms that aren't financial can offer lending and credit services, like small business loans for sellers or installment payments for purchases. They can do this by using customer data and transaction history to determine a person's creditworthiness.
  3. Savings and investments: Embedded finance solutions might have ways to save and invest, like automatic investment portfolios built into e-commerce finance platforms, digital accounts, or round-up savings programs.
  4. Insurance: Platforms that aren't financial can add insurance options, like trip insurance or product guarantees, to give users more value and peace of mind.
  5. Financial Management: Embedded finance solutions may include tools for planning, managing money, and tracking expenses. These tools can help users better manage their money while doing normal things.

Implications for Businesses and Consumers

Embedded finance will affect businesses and customers alike, changing how financial services are viewed and used in the digital age. Integrating financial services into non-financial platforms and goods allows companies to get customers more involved, make more money, and set themselves apart in a crowded market. Businesses can speed up the buying process, lower delays, and increase sales by adding easy payment and finance choices. Adding financial management tools and information can also help companies build stronger ties with customers and keep them returning.

For customers, integrated banking makes things easier, gives them more choices, and makes their experiences more unique. When financial services are built into the goods and sites people use daily, they can shop without any problems, get personalized financial solutions, and make smarter decisions about their money. Embedded finance solutions can also increase financial inclusion by giving people who aren't normally able to get banking, payment, and credit services in non-traditional ways.

Opportunities for Innovation and Disruption

The growth of integrated finance opens up many chances for new ideas and changes in the financial business. Startups and tech companies are using partnerships and APIs to add financial services to many goods and platforms that aren't financial. This is changing the way banking and payments are usually done.

People are developing new ideas in areas like digital wallets and "super apps," which combine many banking services and features into one platform. These tools allow people to manage their money, make embedded payments, and access various banking and trading goods all in one place. When digital wallets and super apps combine financial services and use data analytics, they could become powerful places for managing money and doing business.

Adding financial services to platforms and ecosystems specific to a certain industry is another area of creativity. Fintech companies are working with software companies, e-commerce platforms, and gig economy markets to add payment processing, loans, and other financial services specific to the needs of certain businesses and user groups. By adding finance to vertical-specific platforms, companies can make unique value offers, get users more involved, and get a bigger piece of the value chain.

Challenges and Considerations

There are exciting opportunities for growth and change with embedded finance, but there are problems and things to consider for companies, customers, and policymakers.

One problem is how hard it is to add financial services to sites and goods that need more finances. Building and maintaining strong connections with legal frameworks, payment networks, and banking systems takes a lot of technical know-how and resources. To avoid scams, breaches, and fines from regulators, it is important to ensure all linked systems are secure and compliant and keep data private.

Another problem is the chance of becoming too dependent on and focused on one site. As more financial services are built into non-financial platforms, monopolistic behavior, and anti-competitive practices may occur. There are also possible security holes if the platform goes down or is interrupted. Regulators and lawmakers need to find a way to encourage new ideas and competition while protecting consumers' rights and keeping the market stable.

Concerns about data ownership, control, and privacy also arise when financial services are added to non-financial sites. People may hesitate to give third-party sites private financial information if they don't see or control how it is used and shared. Building trust and responsibility through open data practices and strong security measures is important for getting people to trust embedded finance solutions.

Looking to the Future

The future looks good for embedded finance. It will likely continue to grow and change over the next few years. Embedded financial solutions are expected to become more complex, personalized, and a part of everyday life as technology improves and customer standards change.

The rise of decentralized finance (DeFi) and blockchain technology, the spread of open banking efforts and APIs, and the rise of digital wallets and super apps are some of the most important trends that will shape the future of embedded finance. These trends drive more connectivity, portability, and equality of financial services. This gives individuals and companies more power over their money and lets them join the digital economy.

Also, combining finance with other fields like shopping, healthcare, and transportation will make it harder to tell the difference between traditional and non-traditional financial services. This will open up new ways for people to work together and develop new ideas. When companies use technology and integrated finance, they can find new ways to make money, get customers more involved, and change the future of finance in the digital age.


Lastly, integrated finance is a huge change in how financial services are provided and used. It adds banking and payment features to non-financial goods and platforms. Embedded finance can change the financial industry and open new possibilities for companies and consumers. It can improve the customer experience, spur innovation, and give more people access to money. Embedded banking has a bright future ahead of it, with more growth and new ideas planned in the years to come. However, problems like technology difficulty, legal compliance, and data privacy must be addressed. As companies use technology to make integrated and personalized banking experiences, there are a lot of new ideas and ways to do things that could change things.


Featured image: Image by macrovector


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