Wendy Cai-Lee, CEO of Piermont Bank, has decades of experience in finance & business advisory. She advocates on banking for growing SMBs.
From instant vendor payments and peer-to-peer transfers to buy now, pay later (BNPL) options and travel insurance offered right at the point of booking, the way people and businesses engage with financial services is evolving at a breakneck pace. To that end, the future of finance isn’t just digital; it’s embedded.
As much as it may sound like another fintech buzzword, embedded finance is already seamlessly integrated into our daily lives. And it’s scaling fast, with annual transactions expected to reach $7 trillion by 2026, a sharp increase from $2.6 trillion in 2021.
By definition, embedded finance is the integration of financial services—such as payments, lending, insurance or investment tools—directly into nonfinancial platforms. This allows users to complete financial tasks within the apps and tools they already use, without navigating away.
At its best, embedded finance isn’t about making banking omnipresent, but making it powerfully invisible. It’s about meeting users where they are and making financial services frictionless, relevant and accessible.
Convergence Is The New Normal
Banking, fintech and digital platforms are converging rapidly. And it’s not just tech; it’s verticalized. We’re now seeing deep integration of financial tools within industry-specific software platforms, from logistics to healthcare to real estate. While some recent regulatory shifts have prompted parts of the market to recalibrate, I see the momentum behind embedded finance continuing to accelerate.
What’s emerging is a new ecosystem where nonfinancial companies integrate banking directly into their offerings. According to McKinsey, platforms that integrate financial services experience a twofold increase in customer engagement, and often expand revenue per user by 15% to 20%.
Why SMBs Should Be At The Center Of This Shift
Small and medium-sized businesses (SMBs) have long been underserved by legacy financial institutions. Embedded finance helps flip the script, delivering faster access to capital, integrated services and fewer barriers to growth.
According to Adyen and BCG data, 50% of SMBs are highly likely to adopt a full suite of embedded finance tools. What started with payments has expanded into lending, insurance and cash flow services embedded directly into the tools SMBs already use, like point-of-sale systems, payroll software and logistics dashboards.
For many SMBs, this is a game changer. For the first time, they can operate with the kind of agility and infrastructure once limited to large enterprises.
Adopting Embedded Finance For Your Business
Here are a few things to consider when adopting embedded finance into your operations:
Does embedded finance enhance your core offering, or distract from it?
If you’re a marketplace or SaaS platform that connects buyers and sellers, embedding payments or credit can enhance your value by addressing real customer needs. For example, offering seller financing, integrated payments and cash advances to merchants based on sales activity to buyers can deepen loyalty and boost engagement.
As an example, Etsy integrated payments and seller financing into its platform. Sellers now receive seamless payments and access to working capital, which is fully aligned with Etsy’s mission to empower small sellers. However, if financial services are far from your core value proposition, embedding them may add complexity without clear benefits.
Is the embedded model complementary or competitive with your business?
Embedded finance works best when it supports your platform rather than competes with it. For instance, a SaaS platform serving contractors might offer instant payouts, equipment financing and/or built-in business credit monitoring to enhance the customer experience without diverting focus from the platform’s core function.
Is there a proven path in your sector? Here is a glimpse of successful implementation use cases for various industries:
• Construction: Equipment leasing, instant payments, job-based credit lines
• E-commerce: BNPL, seller cash advances, embedded insurance
• Logistics: Invoice factoring, carrier payments
• Healthcare: Patient lending, real-time claims disbursement
• Accounting Tech: Embedded payroll, tax payment automation, expense cards
Alternative: Consider API Banking Instead
If embedded finance feels too “forward-facing” for your product, you can still improve back-end efficiency by using API banking. It lets you automate and scale a significant volume of wires, ACH payments, invoicing or reconciliation.
This allows your business to benefit from infrastructure-level efficiencies without taking on the risk of offering customer-facing financial products and the cost associated with implementation and ongoing operational support.
Ride The Momentum With Intention
Embedded finance is proving to be a structural shift in how businesses build, distribute and monetize value. But like any innovation, it’s most powerful when used with clarity, tied to real use cases and aligned to your own business model with measurable KPIs.
Done right, embedded finance can empower SMBs to operate and grow with the agility, insights and capital access in a manner that was once reserved for only enterprise giants.
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