Key takeaways:
- Embedded finance integrates financial services like payments, lending, banking, and insurance directly into non-financial digital platforms.
- Businesses use embedded finance to improve customer experience, boost revenue, and gather valuable data insights.
- While embedded finance offers many benefits, it also brings technical challenges, regulatory responsibilities, and cybersecurity risks.
- Companies like Relay, Ramp, and The Hartford provide tools and services that help your business embed financial solutions into your platforms.
What is embedded finance?
Embedded finance means bringing financial services into the digital platforms and apps people already use. Instead of sending customers off to a separate bank or website, it lets them handle things like payments, loans, insurance, or banking right where they are, without leaving the platform.
Using a Buy Now, Pay Later (BNPL) option at checkout, tipping a ride-share driver directly in the app, or accessing small business insurance during payroll setup are all examples of embedded finance in action.
How does embedded finance work?
Embedded finance relies on Application Programming Interfaces (APIs) to connect financial services to business platforms securely. Those tools help different systems talk to each other.
A typical embedded finance process involves the following:
- A business platform offering financial services within its app or website.
- Customers accessing those services while performing routine activities, such as online shopping or business management.
- Third-party financial providers handling compliance, transaction execution, underwriting, and risk management in the background.
- Customers completing financial transactions without leaving the original platform.
This architecture helps businesses create seamless experiences while leveraging trusted financial partners to manage the complexities behind the scenes.
Real-world examples of embedded finance
Many global brands already use embedded finance to improve customer experiences and drive revenue. The following examples illustrate how embedded finance can become a core part of digital experiences, increasing convenience and user engagement.
- Uber enables customers to pay, tip drivers, and manage receipts directly within its app, eliminating the need for external payment steps.
- Shopify integrates payments, merchant lending, and even insurance options into its e-commerce platform, helping merchants manage finances in one place.
- Klarna and Affirm partner with retailers to offer BNPL services during online checkout, letting consumers split purchases into installments without leaving the shopping site.
- Apple provides Apple Card and Apple Pay, embedding financial services into the Apple ecosystem for seamless payments and credit management.
- Amazon offers embedded lending services to merchants, allowing sellers to access working capital directly through the Amazon Seller dashboard.
Future trends in embedded finance
Embedded finance continues to evolve, opening new opportunities for businesses of all sizes. Here’s a look at where the industry is headed.
- Expansion into new industries: Industries like healthcare, logistics, and education are starting to explore how embedded finance can support services such as patient financing, freight payments, and tuition loans. As these sectors adopt financial tools, businesses can discover new ways to connect with customers and create smoother transactions.
- Growth of embedded insurance: More platforms are adding insurance options to help users feel secure and simplify how they get coverage. This trend makes it easier for your business to offer protection exactly when customers need it, without sending them to a separate provider.
- Rise of B2B embedded finance: Business-focused platforms are increasingly embedding services like working capital loans, expense management, and vendor payments. These tools can help your company manage cash flow and daily operations more efficiently, which is especially valuable if you have a growing business.
- AI and advanced data analytics: AI is making it possible to customize financial services based on user behavior and automate risk assessments. Your company can use these insights to deliver personalized financial tools that better meet your customers’ needs and expectations.
- Simplified API standards: New API standards are making it easier for businesses to connect financial services to their platforms without heavy technical work. This shift allows even small businesses to add financial tools and compete with larger players with more resources.
Tip: If your business adopts these trends early, it can stand out, build stronger customer relationships, and discover new ways to grow revenue.
Benefits & challenges of embedded finance
Like any business decision, adopting embedded finance comes with both advantages and potential drawbacks. Your business should weigh these factors carefully to decide if embedded finance is the right fit for its goals and resources.
| Pros | Cons |
|---|---|
| ✅ Enhanced user experience: Keeping users within one platform reduces friction and makes financial transactions seamless. | ❌ Regulatory compliance: Your business remains responsible for ensuring financial partners comply with regulations, including consumer protection and data security requirements. |
| ✅ New revenue streams: Your company can earn additional income through transaction fees, interest-sharing, or commissions from embedded financial services. | ❌ Technical complexity: Implementing embedded financial services requires reliable API integrations, developer resources, and ongoing system maintenance. |
| ✅ Data-driven insights: Financial transaction data provides valuable insights into user behavior and preferences, informing your business’s product development and strategy. | ❌ Security and privacy concerns: Managing financial data means your company has greater cybersecurity responsibilities and must put strong protections in place to keep that information secure. |
| ✅ Stronger customer loyalty: Offering financial services directly on the platform fosters trust and keeps users engaged. | ❌ Reputation risk: If financial services fail, customers often blame the business platform rather than the third-party financial provider, risking brand trust. |
Related: Business Benefits of Fintech: Embedded Finance
Embedded finance vs open banking
Although they might seem similar, embedded finance and open banking serve different purposes.
| Purpose | Integrates financial services, like payments or insurance, directly into non-financial platforms so that users don’t have to leave the experience they’re in | Connects banks and third-party providers for safe data sharing, giving users more control over how and where their financial information is used |
| Primary users | Businesses embedding financial tools into apps and platforms | Consumers or businesses managing accounts across providers |
| Technology | APIs connecting financial services to digital platforms | APIs enabling secure data sharing between banks and apps |
| Examples | BNPL during e-commerce checkout; insurance integrated into business software | Apps aggregating multiple bank account balances |
Who should consider embedded finance?
Embedded finance is not limited to large technology firms. Many SMBs can gain a lot by adding financial services to their platforms. It helps make things easier for customers, opens up new ways to earn revenue, and simplifies day-to-day operations.
Businesses that may benefit include the following:
- E-commerce platforms: To offer seamless payments, financing, or embedded insurance at checkout.
- Software as a Service (SaaS) providers: To integrate banking, invoicing, or expense management directly into their applications.
- Marketplaces and service platforms: To enable payments, tipping, or subscription management within the platform environment.
- Small businesses seeking simplified operations: To consolidate banking, payments, and financial management in one place.
My recommended embedded finance solution providers
If you’re thinking about using embedded finance in your business, you should carefully evaluate partners that specialize in seamlessly integrating financial services into digital experiences, know what technical work is involved, and be ready to handle extra customer support needs.
The following providers offer solutions tailored to SMBs and enterprise platforms:
| Relay |
Provides embedded business banking with features like bill pay, transfers, budgeting, and integrations with accounting software like QuickBooks and Xero |
| North One |
Delivers mobile-first business banking with built-in tools for payments, budgeting, and cash flow management from a single app interface |
| Ramp | Offers embedded spend management through corporate cards, real-time expense tracking, and automated financial controls integrated into business systems |
| Emburse | Specializes in embedded expense management with virtual and physical cards, reimbursement automation, and policy enforcement tools built into financial workflows |
| The Hartford | Provides reliable business insurance options integrated into partner platforms, enabling businesses to embed insurance offers during workflows like payroll setup or onboarding |
| Next Insurance | Is designed for digital-first delivery and offers quick, embedded insurance quotes and policy purchases directly within partner platforms for small businesses |
These providers enable your business to embed financial tools without developing complex banking systems internally. That allows it to focus on core services while enhancing customer value.
Frequently asked questions (FAQs)
What industries can benefit from embedded finance?
Industries including e-commerce, SaaS, healthcare, logistics, and marketplaces can integrate embedded finance to improve user experience, unlock revenue streams, and simplify financial workflows.
Is embedded finance the same as open banking?
No. Embedded finance integrates financial services into non-financial platforms, while open banking connects banks and third-party providers to share financial data across systems.
Do businesses need a banking license to offer embedded finance?
No. Most businesses partner with regulated financial providers that handle compliance, transaction processing, and security.
Is embedded finance safe for customers?
Yes. Embedded finance can be secure when businesses work with reputable partners that follow strict data protection and compliance standards. However, it increases the need for strong cybersecurity practices.
