Embedded Finance

Traditionally, customers went to banks and insurers for financial services. With embedded finance, these services are offered within the platforms people already use, often through partnerships with licensed financial institutions.

Examples include ride-hailing apps that handle payments seamlessly, online retailers offering buy now, pay later options at checkout, e-commerce platforms providing loans to their sellers based on sales data, and car sellers offering insurance during the purchase process.

For example, a marketplace for small businesses might offer its sellers a business account and short-term loans, with repayments taken automatically from their future sales, all within the marketplace's app.

Embedded finance makes services more convenient and can reach customers who might not approach a bank. It is enabled by banking-as-a-service providers that offer licensed financial infrastructure through technology connections. Risks include unclear responsibilities when things go wrong, data privacy concerns and the potential for consumers to take on credit too easily, which has drawn attention from regulators.