As we survey the competitive landscape, platforms will continue to serve as the prime owner of the customer relationship, taking an increasing share of the embedded finance profit pool. Within embedded PoS lending, enablers and platforms should be able to increase their profits, despite shrinking margins. For B2B embedded ACH, we anticipate that platforms will see just under $4 billion of net revenue from value-added services related to ACH in 2026, compared with less than $0.5 billion for enablers.

Furthermore, during the development stage, bank stakeholders should be thinking ahead and forming strategies for successfully implementing the embedded finance solution. The bank risks misalignment between its business goals and customer needs without a well-defined strategy. If the embedded finance solution doesn’t meet customers’ needs (including on a user experience level), customers might walk away from the product, negatively impacting the return on investment. Strategically planning and implementing embedded finance offerings begins with analysis of internal capabilities and ambitions, competitor analysis and commercial attractiveness.

Together, we can unlock the future of embedded finance

When you book a ride through the Uber app, the payment is seamlessly processed within the app, eliminating the need for cash or card payments. The world of finance is constantly evolving, and one of the most significant advancements in recent years is the emergence of embedded finance. This innovative concept is reshaping the way we interact with financial services, making them seamlessly integrated into everyday transactions and experiences.

For example, a bank might also offer to help consumers get rid of unused subscription services or invest in cryptocurrency right in their banking app—rather than downloading a new app or signing up for a new service. Although the opportunities embedded finance provides by increasing convenience to the end user and expanding revenue streams for the financial institutions that power the products, embedded payments trends embedded finance complicates a company’s ecosystem. One sector that banks and fintechs need to monitor and proactively address is cybersecurity. With more access to financial services, the odds increase for scammers as they seek to victimize embedded finance users. One prediction model estimates financial scams will soon grow to $10 trillion using artificial intelligence (AI) and deepfakes.

Who distributes embedded finance, and what products do they offer?

With the rise of embedded fintech, they can embed these offerings in their current products. This lowers the economic risks and allows traditionally slow-moving banking companies to become more nimble and adjust to changing customer needs. Put simply, embedded finance is the placing of a financial product in a nonfinancial customer experience, journey, or platform. For decades, nonbanks have offered financial services via private-label credit cards at retail chains, supermarkets, and airlines. Other common forms of embedded finance include sales financing at appliance retailers and auto loans at dealerships. Arrangements like these operate as a channel for the banks behind them to reach end customers.

The second one is to join the embedded finance movement as a connector, a bridge between financial service providers and non-financial businesses. This may resemble a data transfer network, used by businesses willing to offer financial products. The third option is to collaborate with a company that focuses on embedding the financial infrastructure into its product or service and become a part of that ecosystem.

Embedded finance: Who will lead the next payments revolution?

Driven by short-term incentives, banks may leverage embedded finance as an engine for achieving key performance indicator (KPI) targets, rather than as an incubator for nurturing the digital-native mindset within the organization. Failure to accomplish the latter also may gradually put banks at risk of being a pure bank- license provider for embedded finance. Banking-as-a-service (BaaS) providers use modern API platforms to offer nonfinancial services brands modular banking solutions, using a licensed bank’s regulated infrastructure. Open API platforms and bespoke front-end customer journey technologies are making it faster and easier for FinTechs to partner with brands. The advance of cloud computing, digital architecture, and the proliferation of mobile devices, all enable rapid scale, real-time data exchange and greater connectivity between brands and customers.

This financial transformation will continue to gain strength across nearly every sector as more companies adopt embedded finance and as consumers become more comfortable with these services. With more companies acting as financial companies, financial providers will need to become more accustomed to sharing customers with non-financial companies for services only they used to provide. This will increase competition for traditional finance companies and may result in better products and better customer service.

A completely new proposition for financial services customers

Many of these businesses are leveraging customer data and insights to maximize the customer experience and generate new growth paths. Their goal is to amplify brand loyalty and customer stickiness; increase conversion; and generate repeat purchases. Financial services in the experience age are best delivered in a way that reduces friction in financial interactions while increasing ease and elevating convenience. Businesses ranging from retailers and travel to software companies are also working to tailor their payment services for increased accessibility.

The company supports many different payment options, including credit, debit, and digital wallets, and also handles currency exchange, allowing businesses to transfer money from customers all over the world. Embedded finance is drastically changing when, where, and how people interact with financial services—and creates substantial opportunities for both financial and non-financial companies to serve a wider market. In fact, 88% percent of companies that implement embedded finance report increased customer engagement, and 85% say it helps them acquire new customers. It’s important for bank leaders to be aware of the potential challenges of embedded finance, including privacy and data security risks. However, they should strive to navigate these challenges and pursue embedded finance, as it offers many benefits to financial institutions and businesses, helping them remain competitive.

Disruptive pioneers of embedded finance

As a result, embedded finance will become firmly interwoven into more industries, acknowledging ecommerce as the driving force in business growth and revenue streams. “Buy now, pay later” (BNPL) is one of the most visible forms of embedded lending seen by online shoppers. It appears during the online checkout process, at the moment consumers are contemplating their available funds, and offers to split the payment up over time.

• We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.
• For B2B embedded card payments, as with consumer payments, we expect enabler take rates to face some pressure over the next few years.
• The enablers monetize through a discount rate on the total transaction value that they charge to the merchant.
• Hold a journey-mapping session to determine the life cycle of your customer experiences with your organization.

This metric has grown steadily over the survey’s eight years and accelerated during pandemic lockdowns. A combination of industry, consumer, and macroeconomic factors will power the rise of embedded finance in Europe, the UK, and the US over the next decade. Most of all, embedded finance will become mainstream thanks to increasing consumer trust in Big Tech firms to manage their finances, as well as these firms’ growing footprint in finance.

What is The Future of Embedded Finance?

With the rise of embedded investing, consumers can now buy cryptocurrency from other platforms they already use, including Venmo and Paypal. While this is a newer use case for embedded financial services, it’s ripe for growth as consumers come to expect the sites they use to offer additional services. In the future, this might include being able to discuss stocks in a chat room and then easily buy shares or allowing users to buy stocks in their checking account app. According to our estimates, the market could double in size within the next three to five years. If you’ve ever used a ride sharing service or ordered late night eats using a food delivery platform then you’ve already experienced some of the benefits of embedded finance – seamless, easy to use, and an improved overall customer experience. Embedded finance, simply put, is non-financial institutions using financial tools and services.