What do you think? Have you already used embedded finance today? Most likely yes. 

Embedded finance is, for example, when banking features like accounts or payments are built directly into non-bank apps. Like when a driver gets paid straight into a debit card from the app they work with. But let’s take it step by step.

What is embedded finance? 

Embedded finance means integrating financial services like payments, loans, insurance, or investments directly into non-financial products and platforms. So, instead of redirecting customers to a bank or external provider, the financial feature is placed right into the user experience.

In the past, actions like getting a loan or making a payment happened inside a bank. Now, non-financial companies can offer these services by connecting with fintechs and banks through APIs. That opens the door to smoother mobile experiences, smarter product strategy, and faster delivery of tools like digital lending products.

This shift has changed how people access financial services. In the UK, research shows that 80 % of major brands have already seen conversion or loyalty improve through embedded finance. But many still feel their current provider is not offering a great customer experience at scale.

How does embedded finance work? 

Let’s say you’re building a product that needs payment options, savings, or lending tools. You don’t need to become a bank. With embedded finance, you can plug those services in through APIs. That’s how apps today offer features like instant credit, digital wallets, or in-app bank accounts without building financial infrastructure from scratch.

The backbone of embedded banking and embedded payments is a mix of API integrations, cloud infrastructure, and licensing. You connect to a financial partner, and they provide the rails and compliance coverage so you can launch quickly and securely.

One good embedded finance example is Caxton, a fintech that processes over a billion dollars in remittance payments. Their goal wasn’t just adding features for users, but cleaning up the back office. Using virtual IBANs, they automated reconciliation and cut down on human error, which saves their team tons of hours.

Difference between open banking and embedded finance

They often show up in the same conversation, but open banking and embedded finance solve different problems.

Open banking is about giving third parties secure access to your bank data (balances, transactions, or spending habits), usually through APIs. You have to give permission first. Once you do, apps and services can use that data to offer smarter tools, better loan offers, or new ways to pay directly from your account.

Embedded finance, on the other hand, is about putting financial services like payments or credit directly inside apps that weren’t financial to begin with. The goal is to let people access what they need. This could be, for example, insurance, a virtual account, or a small loan without the need to switch platforms.

In short, open banking feeds data into better tools. Embedded finance brings the tools into the experience.

They also work together. For example, an embedded banking platform offering Buy Now, Pay Later could use open banking to check your balance before approving a transaction. The smoother these systems talk to each other, the better the experience feels for users, and the more efficient things get for the business behind it.

How can embedded finance help businesses?

Embedded finance makes it easier for businesses to offer new services right inside the platforms their customers already use.

For small businesses, this unlocks faster access to tools they might not get from traditional banks. For example, e-commerce, gig work, or even social media. 

For platforms, it’s a way to offer end-to-end solutions without building a bank from scratch. By embedding financial services into what they already do, companies open up new revenue streams without the overhead of managing licenses or infrastructure.

Embedded finance prediction, market growth (future of)

The growth is hard to ignore. Analysts expect the market to generate $385 billion in revenue by 2029. That’s a huge jump from just $23 billion in 2020.

What’s fueling this? A shift in expectations. Customers want smoother checkouts, faster access to credit, and financial tools built into the platforms they already trust. And businesses are responding. It’s a bit of a snowball effect. The more people use embedded finance, the more companies offer it. And the faster it becomes the norm.

What are some examples of embedded finance?

The number of different categories and types of embedded finance is growing fast. Understanding what embedded finance is just by definitions isn’t always helpful. But looking at real use cases makes it much clearer.

Here are some key examples of how embedded finance shows up in everyday products:

Embedded payments

Wondering what embedded payments are? The answer is mobile apps that let you pay without digging for your credit card. Starbucks, for example, allows users top up and pay directly in-app, saving time and adding reward incentives.

Branded payment cards

Businesses can now easily offer branded cards to their employees or customers. Platforms like Ramp and Bill provide companies with the tools to quickly issue virtual and physical cards. This improves both control and convenience.

Embedded lending

Buy now, pay later is one of the most visible embedded finance products. It shows up during checkout and lets users split their payment. Klarna and Afterpay are two of the leading names in this area.

Embedded investing

With apps like Greenlight or PayPal, users can invest money or buy crypto without needing to open a separate account. Investing is becoming just another button in everyday apps.

Embedded insurance

Nowadays, insurance can be offered right at the point of sale. For example, when you’re buying a laptop and see an offer for a warranty or coverage. Companies embed this process directly into checkout to make it seamless.

Embedded fintech

Even financial institutions are embedding third-party fintech tools into their own products. Banks now offer features like budget tracking, crypto purchases, or automatic savings tools inside their main apps.

Embedded financial marketplaces

These are platforms where users can browse and compare offers from different financial providers without ever leaving the platform. 

Just a couple of examples can show that embedded finance is changing how people interact with money, and where those interactions happen.

Pros and cons of embedded finance 

There are clear upsides of embedded finance in business, but unfortunately, it’s not all smooth sailing. Here are some of the pros and cons of embedded finance. 

Pros of embedded finance

Better customer experience: embedded finance removes friction by keeping financial actions inside the main app or platform. That means fewer redirects and faster flows, which usually leads to happier users and higher conversion rates. 

New revenue streams: platforms can earn from financial services like embedded payments, lending, or insurance without building a bank. Many see this as a valuable addition to their core business model. 

Stronger engagement and loyalty: users stick around when the tools they need are right where they already are. Embedded services can deepen relationships instead of having users leave for another app. 

Access to data and insight: with embedded tools, businesses can better understand customer behaviour and tailor offers. This can improve the customer’s overall experience. 

Cons of embedded finance

Regulatory and compliance complexity: adding financial services means dealing with laws around data, payments, KYC, and more. If you want to stay compliant, it can be costly and slow. 

Security and privacy risk: handling financial data means high responsibility. You need strong systems to protect sensitive information, or you risk losing customer trust. 

Technical and integration challenges: connecting multiple APIs and providers can be tricky, and poor implementation can actually make the experience worse. 

Potential customer overwhelm: too many embedded options without clear value can confuse users rather than help them, especially if they feel pressured to use financial features.

How to start with embedded finance?

Much of what makes embedded finance work happens behind the scenes: the clear infrastructure, the solid integrations, the small decisions that make a product feel easy to use.

You don’t have to start with a full product overhaul. Begin by solving one clear need, maybe it’s quicker payouts, or offering credit at checkout. Look at where your users already take action and ask: could this be easier with an embedded option? 

At Vacuumlabs, we help teams figure out where to begin and how to build it right. From early product discovery to solution architecture and launch, we make embedded finance easier to design, ship, and scale.

Source:
1. https://paymentexpert.com/2025/09/03/embedded-finance-natwest-boxed-report/?utm 

2. https://plaid.com/resources/fintech/what-is-embedded-finance/