Embedded Finance: How to unlock a $800bn opportunity

Key stakeholders

There are broadly four key stakeholders in this journey: consumers, merchants, financial service (FS) providers, and technology providers. Together, these players form a dynamic ecosystem poised for exponential growth.

Merchants

The companies embedding financial services into their products or customer journeys to increase value, conversion, and retention.

Examples:

· E-commerce platforms offering integrated payments and financing

· Ride-sharing apps enabling in-app tipping or driver cash advances

· SaaS platforms embedding invoicing, payments, or credit products

Key benefits:

1) New revenue streams: Embedded financial products (e.g. lending, insurance, payments) open up monetization opportunities through commissions, fees, or revenue sharing.

2) Higher conversion rates: Reducing friction at checkout or decision points, such as offering financing, boosts completed purchases and average order value.

3) Increased customer satisfaction: Customers appreciate convenience and flexibility, especially when financial options (like pay-later or insurance) are integrated into the journey.

4) Enables targeting of more customer types: Financing options or alternative payment methods can reach customers who might not otherwise be able or willing to purchase, expanding the addressable market.

5) Increased customer retention and loyalty: Embedding finance into core services creates a stickier ecosystem, making it less likely for customers to switch to competitors.

Financial service (FS) providers

The regulated entities or technology enables that provide the infrastructure and financial products to be embedded. They fall into two groups:

· Traditional institutions – Banks, credit institutions and insurers that power embedded services behind the scenes

· Fintech enablers/infrastructure providers – Companies that build APIs and platforms that let merchants plug in financial services easily, such as:

o Banking-as-a-Service (BaaS)

o Payment providers

o Lending/BNPL enablers

o Insurance enablers

Key benefits:

1) Cost-efficient customer acquisition: Partnering with digital platforms enables access to large user bases without the need for direct outreach or branches.

2) New distribution channels: Financial products can be delivered at scale through third-party ecosystems, expanding reach quickly.

3) Product innovation potential: Embedded models allow for new offerings like micro-insurance, real-time lending, or usage-based pricing.

4) Better risk and personalization through data: Access to platform-level data improves underwriting, pricing, and targeting of financial products.

5) Brand visibility and relevance: Co-branded or white-label financial products help providers stay top-of-mind within high-traffic digital experiences.

Technology providers

Technology players that build and maintain the infrastructure enabling seamless embedded finance experiences. This group includes:

· Platform developers and system integrators enabling embedded flows (e.g. POS systems, SaaS platforms)

· Cloud, API, and orchestration providers enabling scalability and compliance

· Authentication, KYC/AML, and data-sharing enablers for secure and compliant onboarding

Key benefits:

1) Sustained revenue growth: With increased embedded finance activity, the tech players are expected to see a strong and sustainable rise in their own revenues.

2) Access to new customer segments: By partnering with financial services providers, tech companies can get to market faster and reach a wider set of customers and consumers by relying on FS providers’ expertise and regulatory approvals.

3) Stickier customers: Thanks to sophisticated workflows and setups, customers of tech companies that embed financial services are stickier until a major reason for change is created.

4) Data-empowered approach: Wider sources and variety of data enable better decision-making for the company’s own strategy as well as for product developments.

5) Product expansion: Thanks to growing revenues and partnerships, tech players are free to focus on their core business, developing solutions that continue to enhance value for the ecosystem participants.

Consumers

End users who benefit from financial services embedded into everyday platforms and experiences.

Examples:

· A shopper using “Buy Now, Pay Later” at checkout

· A traveler purchasing travel insurance while booking a flight

· A freelancer receiving instant payments through a gig platform

Key benefits:

1) Frictionless experience: Financial services like payments, loans, or insurance are integrated directly into platforms consumers already use, eliminating the need for external steps.

2) Faster access to services: Instant approvals and real-time access reduce waiting times for credit, insurance, or payouts.

3) More relevant offers: Embedded finance delivers contextual options such as pay-later at checkout or travel insurance when booking a trip.

4) Greater financial inclusion: Platforms can serve consumers who may be underserved or overlooked by traditional financial institutions.

5) Simplified decision-making: Consumers can act on financial options without leaving the platform, leading to faster, easier choices.