Embedded finance is a diverse sector poised for rapid growth

Embedded finance is transforming the way non-financial platforms interact with financial services and shaping the future of financial inclusion in developing and developed economies.

Think about how you don't need to set a reminder to pay for your Spotify or Netflix subscription because both streaming platforms offer recurring payments to their customers. Spotify and Netflix are not financial platforms but they work with banks, financial institutions, and fintechs to offer finance-related features within their platforms.

Your ability to set up a payment card for a Spotify subscription without needing to leave the app is made possible with an API integration. The magic of embedded finance is that it integrates financial services directly into non-financial platforms, simplifying how users access these services.

Where growth is concerned, embedded finance is gaining traction in LATAM countries like Mexico and Colombia and European markets like Germany and the UK. According to a report by McKinsey, the embedded finance sector generated an estimated €20 billion to €30 billion in Europe in 2023, which was about 3 percent of total banking revenues

But embedded finance extends far beyond payments, touching multiple aspects of financial interactions. In today’s article, we will walk through key categories of embedded finance and how they are shaping global financial ecosystems.

Categories of Embedded Finance

Embedded Banking

Oftentimes, people mistake embedded financing for embedded banking, but they are not the same. Embedded banking directly integrates financial services into the platforms of non-financial businesses. The integration makes it possible for non-financial businesses to connect banking services - such as card payments, bank transfers, and loans - within their existing interfaces, making it easier for their customers to access those services without leaving their website or app.

Embedded Payments

Embedded payments are similar to embedded banking in that they allow non-financial platforms to offer financial services to their customers. But in the case of embedded payments, it's all about the integration of digital payment solutions - wallet payments, P2P transfers, etc - into existing platforms and apps. I can add money to my Uber wallet, using my bank card, without needing to log into my banking app to make a transfer.??

For example, an e-commerce platform like Konga offers financial services to its customers via its Kongapay feature. Konga customers can shop and pay for items, pay bills, and send money, using their Kongapay account without leaving the app.

Embedded Insurance

Embedded insurance easily integrates insurance services into non-financial platforms, offering protection at the point of need. For example, an online phone store can offer insurance coverage for devices at the point of checkout. These services often include APIs for insurance management and claims automation, enabling these platforms to deliver insurance solutions directly to their customers.

Embedded Investing

Embedded investing and wealth management refers to the integration of investment products - money market, treasury bills, etc - directly into financial and non-financial platforms. Kuda Bank allows its customers to buy stocks within their banking app and BitPay makes it possible for ecommerce platforms to enable bitcoin payments for their customers.

B2B Embedded Lending

B2B embedded lending enables businesses to access credit and financing options directly within any platform. For example, a bookkeeping platform can offer embedded lending to merchants, ensuring that the businesses within its ecosystem stay operational and agile and have enough to deal with, manage, and scale business growth even in tight financial situations.

As embedded finance continues to evolve, its impact will reach even more industries, offering solutions that will meet the unique needs of consumers and businesses alike.

So, whether you’re a fintech innovator or a business leader, now is the time to explore how embedded finance can transform your offerings and create a more seamless future.

Embedded finance isn’t a trend—it’s the future of financial services. By integrating lending, payments, insurance, investments, and B2B financing into existing platforms, it’s reshaping the financial landscape to be more accessible and inclusive.

So, whether you’re shopping, working, or simply trying to manage your finances, embedded finance is there, making life just a little bit easier