What is embedded finance? 4 ways it will change fintech

The towering, one-size-fits-all SaaS behemoths still hold most of the market share but can’t offer the same ground-level industry knowledge of smaller, verticalized competitors. For instance, instead of addressing the collective hospitality market with nondescript terms and tools, verticalized software providers can credibly offer value to restaurants, hotels, spas and gyms. The precise traits, opportunities and challenges of each business are baked into the software. High-quality embedded finance tools depend on strong partnerships among trusted parties. A banking as a service (BaaS) provider can connect fintechs with the right partners, providing an API interface for integration.

  • In some cases, the platform may also store customer payment information for a faster checkout in future transactions.
  • Embedded banking examples
    include the debit card from Lyft, which lets drivers instantly get paid by the ride-share company.
  • With Affirm, the financing workflow is embedded into the checkout experience.
  • SmartPay Rewards, a mobile app for gas stations and convenience stores, offers customers discounts and rewards in exchange for using its embedded bank account payments tool.
  • Rather than choosing and managing their payments providers themselves, they can turn to your platform directly for their payments needs.
  • A banking as a service provider (BaaS) can help non-financial businesses embed payment functionality into their platforms.

Embedded payments refer to digital payment options that are embedded within non-payment apps. These tools allow non-finance or non-fintech merchants to accept payments. It can refer to embedded payments available at checkout on e-commerce sites, payments by SMS or text, or closed-loop payments where retailers own the whole transaction.

What Is Embedded Finance?

The merchants no longer have the frustration of having to try to help solve any customer service issues with multiple providers. Starbucks has more liquid cash at its disposal than most mainstream banks do. Adyen for Platforms allows you to easily embed payments into your platform or marketplace with our out-of-the-box solution or a fully customizable setup. Our ever-evolving technology helps your users sign-up, sell, and get paid in one place. Rather than spending precious time selecting payment providers, connecting payments to the platform they use to run their business, and troubleshooting with multiple support desks, they can set up payments in a single click. Before we dive deeper into the benefits of embedded payments, let’s start with the basics.

embedded payments examples

When a Lyft driver has a Lyft checking account that gets them paid faster, it’s less likely they’ll also drive for Uber. This option is more suitable for platforms that want to provide a fully customized payments experience offering. Tailored embedded payments give platforms full control over the integration.

The growth of embedded payment solutions

With this in mind, it’s not surprising that a growing number of businesses are interested in becoming facilitators of the payment process. In the same way that customers will blame the brand and not the parcel carrier if their order is delivered late, merchants cannot simply pass off a failed transaction on a third-party payment platform as ‘not their fault’. We see six trends in the embedded-finance and banking-as-a-service arena. Understanding and monitoring these trends can help banks, and those who hope to work with on embedded finance, identify opportunities and guard against threats.

embedded payments examples

Embedded banking examples
include the debit card from Lyft, which lets drivers instantly get paid by the ride-share company. Embedded finance broadly refers to the embedding of financial tools in non-financial services. When a website or app other than that of your bank allows you to see your bank account balance, that’s an example of embedded banking. When you pay at the online checkout of an e-commerce site, you use an embedded embedded payments examples payment tool. Embedded finance providers such as Unit and Checkout.com do the legwork of building partnerships with banks and creating APIs to help companies quickly add on services like banking and payment cards. Then, they partner with non-financial companies (their customers) to get them up and running with these embedded finance products and services in weeks or months, rather than the years it would take to build.

Global Payments

Embedded payments enable fast, easy transactions for businesses and their customers, and that can be related to hardware. With embedded payments, hardware is always up-to-date and compatible with the provider’s software. California-based casual lifestyle store Borrego Outfitters, which switched to Lightspeed this year, shows what this looks like in action. Embedded lending, more often known as BNPL, is well-known in consumer-focused embedded finance due to the prevalence and success of big businesses. However, a growing B2B BNPL market offers firms a better digital trade credit alternative, eliminating the need for onerous paperwork and drawn-out approval processes.

In sum, Starbucks has created an entire closed-loop ecosystem of embedded services that draw the customer deeper into the brand experience. Another challenge is understanding the role your company would play in the ecosystem. Fintechs that offer embedded finance products are also gaining significant ground.

What the embedded-finance and banking-as-a-service trends mean for financial services

Its recent acquisition of healthcare events management and payment company Physicians World is a harbinger. This move embeds payments for customers working in the burgeoning healthcare events space, manages multiple merchant relationships and automatically complies with relevant regulations. Software companies that address the needs of particular industries are poised to win big.

embedded payments examples

Embedded fintech provides a way for financial institutions to offer a wider range of services, engage their customers, and deliver more value. Historically, if a bank wanted to offer a new product, say a new type of investment or a different type of loan, they would need to spend months, if not years, developing, building, and launching a new product. 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.


A third option is for a company to work with a business that focuses on embedding the required infrastructure into its product or service. Platform ecosystems can quickly expand due to an increasing number of transactions and payment processing, which may reveal a need for outside financial services. Platform ecosystems can quickly expand due to an increasing number of transactions and payment processing, which may
reveal a need for outside financial services.

FinTech Magazine and its entire portfolio is now an established and trusted voice on all things FinTech, engaging with a highly targeted audience of 113,000 global executives. We provide key industry players with the perfect platform to showcase their brands, develop content syndication plans, webinars, white papers, demand generation as well as a global set of events (In-Person & Virtual). One example of a company that uses cards to streamline payments is PayPal.

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

One of the newer kids on the embedded finance block is embedded insurance. Insurance is required for a lot of purchases and products, yet the user needs to go to a separate provider, re-enter personal and product information before purchasing the cover. The vehicle manufacturer offers insurance to all drivers purchasing a car, eliminating the need to explore other providers or duplicate efforts as Tesla already has the relevant details about the vehicle and driver. Some companies act as connectors, providing the bridge between financial services and non-financial businesses. For example, Plaid has a data transfer network that organizations can use to offer financial products. Here at Hydrogen, we offer a no-code platform that allows companies to quickly introduce financial services to their business apps and products.

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