Financial interactions between banks, businesses, and consumers are evolving as embedded finance gains traction. Unlike traditional direct-to-consumer models, embedded finance integrates banking, payments, and lending into non-financial platforms, offering new ways for companies to engage with customers. Through mobile devices and digital applications, users can now access financial services without switching platforms, making transactions more seamless. This shift is influencing how companies generate revenue and manage cash flow, impacting both financial institutions and technology firms.
Previously, financial services were primarily offered through banks and traditional lenders, requiring users to initiate transactions separately. With embedded finance, companies now include financial services within their platforms, reducing friction and increasing convenience. The adoption of payment solutions such as Buy Now, Pay Later (BNPL) and digital wallets has expanded, providing consumers with more flexibility. Additionally, small and medium-sized businesses (SMBs) are increasingly looking for embedded lending options to maintain cash flow and support growth.
How Are Lenders Responding to Embedded Finance?
Lenders are recognizing the potential of embedded finance, especially in making credit more accessible. Research from Visa and PYMNTS Intelligence indicates that nearly half of the surveyed lenders offer only embedded lending, while another 31% combine embedded and traditional lending options. Consumer-focused lenders have embraced embedded finance more than their SMB counterparts, with 83% providing at least one embedded lending product. Meanwhile, 37% of SMBs have expressed an interest in switching to providers with embedded lending solutions.
Financial institutions and technology firms are leveraging data to refine lending offers, improving approval rates and expanding financial inclusion. As interest in embedded lending grows, companies are adapting to provide tailored financial products that align with customer needs. SMBs, in particular, are considering these options to navigate uncertain economic conditions and trade-related challenges.
What Role Does Embedded Payments Play in Commerce?
Embedded payments have become a key feature for independent software vendors (ISVs) and marketplaces, enabling them to integrate financial offerings directly into their platforms. According to research from Carat from Fiserv and PYMNTS Intelligence, 65% of ISVs and marketplaces without embedded payment solutions are planning to incorporate financial products. These additions include digital wallets, branded cards, and BNPL options, allowing businesses to create a more streamlined purchasing experience.
For consumers, embedded payments simplify transactions by consolidating multiple financial services within a single platform. Marketplaces now provide centralized access to various lending options, facilitating better decision-making. As a result, businesses can drive engagement while improving revenue streams through integrated financial services.
Regulatory developments could shape the future of embedded finance, particularly in the United States, where data-sharing regulations are still evolving. Section 1033, which governs access to consumer financial data, may influence how banks and fintech firms collaborate to deliver personalized financial products. Permissioned data sharing allows financial institutions to tailor financing options while ensuring compliance with emerging regulations.
The expansion of embedded finance reflects a broader trend toward integrating financial services with digital experiences. Businesses that adopt embedded banking, lending, and payment solutions can enhance customer engagement while optimizing operational efficiency. For consumers and SMBs, these innovations provide greater access to financial products that align with their needs, signaling a shift in how financial services are delivered.
