What is embedded finance? A guide for banks

Think about the last time you added insurance to a purchase at checkout, ordered and paid for a meal from your phone, or booked a flight online without pulling out your wallet. If you’ve ever accessed financial services seamlessly in a different platform, that’s embedded finance in action. 

These integrated experiences are the new standard for customers. Businesses across industries can now offer frictionless payment methods, Buy Now Pay Later (BNPL) options and tools like savings accounts, all within their existing products.

And behind each one of these interactions is a bank. Embedded finance empowers banks to go beyond traditional branch-based services and reach new markets with tailored digital-first solutions.

When banks and fintechs connect, customers gain accessible financial services integrated into familiar platforms. But how exactly do embedded finance programs work? We’ll explore the basics of embedded finance — and the specialized technology that makes it possible.

What is embedded finance?  

Embedded finance is the inclusion or “embedding” of financial services into non-financial digital platforms or products. This allows companies and non-financial brands to offer banking services to users without redirecting them to a traditional bank. For example, when Uber and Lyft allow riders to pay in-app via stored payment methods or digital wallets, embedded finance is at work. Banks can tap into new customer bases by partnering with these platforms, especially in markets where they may not have a physical presence. 

These integrations offer huge growth potential for banks and businesses alike, with the embedded finance market projected to surpass $320 billion in revenue by 2030. Financial institutions that understand the power of embedded finance partnerships — and how to execute them effectively — will maintain a competitive edge. 

Let’s look at a few examples of embedded finance: 

• Embedded payments: Integrated payment options are now a norm for modern platforms. When a customer orders food through DoorDash or GrubHub, for instance, they pay directly in the app. Previously, they might have paid a delivery person with cash or provided their credit card details over the phone. Customers have grown accustomed to embedded payment options in diverse services — from e-commerce sites to ride-hailing apps to gaming platforms. For companies across sectors, offering embedded payment options can enhance the user experience and streamline transactions.  

• Embedded banking: Embedded banking refers specifically to banking services — like account creation, fund transfer, virtual cards, or deposits — offered within non-financial platforms. For example, Shopify integrates banking tools like business checking accounts and bill pay into its platform so merchants can manage their finances alongside their e-commerce operations. Essentially, embedded banking allows companies to provide banking services to users without becoming a neobank themselves. 

• Embedded lending: Embedded lending integrates lending services into non-financial platforms. Rather than navigating traditional loan applications, customers can access financing options through merchants they already interact with. For example, Affirm and Klarna are BNPL providers that allow customers to pay for purchases in installments, often with no interest if payments are made within a specified time frame. The rise of embedded lending has made credit services accessible to a wider range of audiences.

Who is involved in embedded finance integrations?

Embedded finance products are designed to be frictionless for customers to use, but there is more complexity behind the scenes. Successfully creating and deploying an embedded finance solution requires coordination between three key players — fintechs, banks and technology partners — to ensure it works smoothly and in compliance with financial regulations.  

• Fintech companies: Embedded finance allows fintechs to embed their tools in relevant platforms. For instance, Stripe embeds its payment processing services into e-commerce platforms and applications, enabling businesses to seamlessly accept payments. In this model, fintechs can move beyond operating as standalone service providers and extend their services to new ecosystems. But to build a successful embedded finance partnership, fintech companies need to work with a reputable chartered bank and an embedded finance technology provider that enables a direct bank relationship. 

• Banks and financial institutions: Embedded finance empowers banks to reach new customers by extending their services through non-financial platforms. For example, consider a community bank that partners with a fintech company to offer lending services specifically for small business owners. Rather than being limited to local clientele, that bank can serve a core demographic at scale across digital platforms.
  
  However, banks carry unique responsibilities as chartered institutions. Fintechs aren’t beholden to the same rules, which means the burden of regulatory compliance always rests with banks in embedded finance relationships. To meet regulatory obligations, banks must maintain full visibility over fund transfers at all times. A technology partner with robust control capabilities will enable banks to mitigate risk and maintain compliance as programs scale. 

• Technology providers: Technology providers supply the software to facilitate embedded finance. By delivering essential infrastructure, technology providers enable banks and fintechs to seamlessly integrate financial services into existing digital products without the complexity of building an embedded finance platform themselves.
  
  As regulatory and compliance demands evolve, technology providers can also help banks stay ahead of new requirements with innovative software that meets rigorous standards for data reporting, security and fraud prevention. In particular, technology providers should empower banks to maintain complete oversight and control of their embedded finance partnerships through features like transaction monitoring, reconciliation and risk assessment tools. 

‍How Treasury Prime helps banks build sustainable embedded finance partnerships 

As more customers expect seamless digital experiences, banks need solutions to expand and diversify their distribution channels. But to capitalize on embedded finance opportunities, banks must also balance innovation with risk management. 

At Treasury Prime, we know transparent collaboration is table stakes for a successful embedded finance partnership. While fintechs excel at delivering customer-first innovations, traditional banks are responsible for protecting customer funds. As a technology provider, our job is to empower each party to do what they do best. That’s why we innovate with compliance in mind, ensuring programs are secure, scalable and adaptable to meet evolving regulatory standards. 

Our comprehensive embedded banking platform offers holistic support for banks and their partners through a suite of solutions:  

• Modern and Modular Bank OS: Our embedded bank operating system goes beyond basic integrations to enable direct-to-bank connections. Robust management controls — like fund segregation and real-time reconciliation — offer the oversight required for banks to own and manage partnerships with confidence. 

• Partner Marketplace: The right partners are essential for banks to grow their products safely and sustainably. Through our Partner Marketplace, banks can access industry-leading product providers with diverse capabilities — from AML transaction monitoring to KYC checks. By integrating with partners through our marketplace, banks can reduce implementation barriers to efficiently build solutions aligned with their strategic goals. 

• Seamless Data Analysis: Built on our existing data warehouse, Prime Analytics combines standard reports with powerful business intelligence tools. Banks can access a reporting dashboard with key insights — like transaction-by-transaction reconciliation analysis and interchange breakdown — to analyze trends and automate compliance reporting. 

‍A transparent future for embedded finance 

Embedded finance helps banks and businesses meet customers where they are. For banks in particular, it offers an opportunity to serve more customers through innovative banking solutions and capture new markets. 

Treasury Prime’s embedded finance technology platform provides banks with the tools to bring compliant embedded finance offerings to market at scale. Whether you want to launch a new program or expand an existing solution, our platform provides full control and oversight throughout the process.  

Ready to take your embedded finance program to the next level? Get in touch to learn how Treasury Prime can help. 

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