Albeit blunt, it’s safe to say that the world we presently live in is being increasingly defined by instant gratification and seamless digital experiences. Thanks to these trends, finance is undergoing a profound transformation.
It’s evident to anyone who cares to take a moment to consider the rapid change in the finance industry that the days when interacting with banks meant a physical trip to a branch or an online portal are already gone. The financial services of today are subtly interwoven with people’s everyday lives. They may have become invisible, but they’re also omnipresent.
All aspects of financial services have taken the hit: the way people pay, lend, and save has fundamentally changed. So fundamentally, in fact, that it is safe to say that the world is witnessing a profound paradigm shift, better known as embedded finance.
What Is Embedded Finance?
Simply put, embedded finance refers to the integration of financial services (such as payments, lending, or insurance) directly into non-financial platforms or apps. Think about ordering a ride on Uber or Bolt, and the payment happens automatically in the background, without you ever opening a separate banking app.
Next, think about buying a new gadget online and being offered “Buy Now, Pay Later” (BNPL) options directly at checkout. These are examples of embedded finance in action, which seamlessly blends financial transactions into the existing customer journey.
There are several key factors driving the evolution or, rather, revolution. Firstly, consumer expectations have soared. People have grown accustomed to the frictionless experience offered by tech giants in other sectors and have come to demand the same level of ease and personalization from financial interactions. “Consumers expect one-click onboarding, real-time support, and hyper-personalized offers,” as Papuna Lezhava, CEO of Tbilisi-based KEEPZ, puts it. The multi-step processes often associated with traditional banking feel increasingly antiquated in comparison.
Secondly, the rise of open banking has given wings to the trend. Open banking initiatives provide secure APIs, which make it easier for non-financial companies to access and integrate banking functionalities into their platforms. In other words, businesses no longer need to build their payment infrastructure from scratch. They can simply leverage existing banking services through APIs.
Coopetition at Its Finest
This collaborative model has been dubbed “coopetition” and is becoming increasingly prevalent, as fintechs and banks realize the mutual benefits of working together. Namely, fintechs offer agility and speed, whereas banks bring scale, trust, and capital to the table.
The impact of embedded finance on how people pay is arguably the most visible. For years, the act of payment was a separate, cumbersome step. Whether it was swiping a card, counting out cash, or manually entering details online, payment required conscious effort, the type of effort the impatient modern consumer is no longer graced with.
Redefining Lending
Beyond payments, embedded finance is fundamentally reshaping lending by making credit more accessible and contextually relevant. While traditional lending involves lengthy application processes, extensive paperwork, and a visit to a bank branch, embedded lending brings financing options directly to the point of need.
The most prominent example is the Buy Now, Pay Later (BNPL) service, which offers the option to split a purchase into interest-free installments. Best of all, it comes with instant approval based on minimal information.
As David Jarvis of David Jarvis Associates Ltd puts it, “Life doesn’t happen at the bank. Life happens everywhere else.” This sentiment is particularly true in B2B scenarios, where embedded lending is revolutionizing how businesses manage their working capital.
Now, a small business can use SaaS tool for inventory management. When that software identifies a need for additional stock, it may offer an immediate loan based on the business’s real-time sales history and operational data, through embedded lending.
This approach to lending is far more efficient than traditional methods, as it helps businesses seize opportunities without the typical delays associated with obtaining financing. Renn Salo, heading up payments at Inktavo, notes that for their software users, embedded lending based on sales history and repaid through future sales has proven to be a “convenient and unobtrusive solution” for capital needs.
Savings Revolutionized
Saving, too, is undergoing a quiet transformation. While less immediately apparent than payments or lending, embedded finance is making it easier for people to build savings habits by integrating saving mechanisms into everyday activities.
E.g., some platforms offer round-up features, where every purchase is rounded up and the spare change is automatically transferred into a savings account. This gamified approach makes saving feel less like a chore and more like an effortless background process. Further out, as financial services become more integrated, personalized financial advice and automated budgeting tools can be seamlessly embedded into platforms. This is likely to empower users with greater control over their financial health without requiring them to actively seek out separate advisory services.
Where Does This Revolution Put Traditional Banks, Though?
For traditional banks, the evolution is both a profound challenge and a significant opportunity. For decades, banks have owned the customer relationship, serving as the central hub for all financial needs. However, as non-financial platforms capture more of the user’s daily digital interaction, the direct relationship between the customer and their bank is becoming increasingly scarce.
“The rise of embedded finance presents a clear dilemma for traditional banks: opt in and share revenue with partners, or opt out and concede ground to tech players stepping into the financial space,” says Tom Spraggs, director and head of UK Retail, BMS Group.
Banks that cling to outdated models risk being outpaced by more agile, customer-centric players. The closure of over 20% of bank branches in Chile in the past three years, as reported by La Comisión del Mercado Financiero (CMF) is a stark reminder of the shift towards digital-first financial access.
However, many forward-thinking banks are adapting and embracing new business models. They have started Banking-as-a-Service (BaaS) capabilities, which enable them to become the invisible infrastructure providers that power embedded finance.
There are many reasons why they should do so. For one thing, banks are perfectly positioned to leverage their regulatory expertise, robust technology, and balance sheet strength to enable non-financial companies to offer financial products under their own brand. This allows them to expand their customer base, access new data insights, and diversify their services without investing in building direct-to-consumer digital products from scratch.
Meron Colbeci, Chief Product Officer at Checkout.com, has noted that, while embedded finance increases competition, the core value of banking apps remains strong, and partnerships are becoming essential.
The Future of Embedded Finance
The future of embedded finance is likely to become even more pervasive. Experts predict the global embedded finance market to reach a staggering $7.2 trillion by 2030. The integration of AI will further personalize financial offerings and enable real-time risk assessments for lending, tailored product recommendations, and enhanced security measures.
Financial services are likely to become even more anticipatory, seamlessly integrating into people’s lives to predict needs and offer solutions before they even consciously realize them.
For example, as embedded banking continues to evolve, solutions like Ready-to-Launch are stepping in to solve two of the biggest challenges facing financial institutions today — managing risk effectively and expanding customer reach. By consolidating oversight into a single, streamlined environment, banks gain the clarity and control needed to scale with confidence. Even better? This approach opens the door to new customer segments through smart partnerships with vertical SaaS platforms, redefining what’s possible in the next wave of banking innovation.
Bill Gates predicted this trend 30 long years ago, famously saying that as “banking is necessary, banks are not.” We seem to be witnessing this quote taking a life of its own before our very eyes.
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