People can now pay, borrow, or get coverage without leaving an app they already use. This guide explains how companies add these options to familiar digital journeys. The approach, known as embedded finance, puts useful tools where customers need them.
The opportunity is growing fast. One estimate valued the embedded finance market at $111.72 billion in 2024 and projects about $1.73 trillion by 2034, a 31.53% annual growth rate. Other reports put the 2023 market at $82.32 billion and $82.7 billion, showing how estimates vary by source.
Digital habits help explain this growth. The World Bank says two-thirds of adults worldwide make or receive digital payments. In developing economies, that share reached 57% in 2021, up from 35% in 2014. For banks, providers, and businesses, these shifts can open new paths to revenue and a smoother customer experience.
Next, explore product models, partnerships, customer benefits, and compliance needs, with examples from Uber and Shopify. Learn how these tools connect with daily money management and shape the future of digital platforms.
What Is Embedded Finance?
Embedded finance adds a financial service to a nonfinancial business or app. Customers can find payment, lending, or insurance options directly within a platform they already use. The business makes the offer part of a familiar task, such as shopping or booking a ride.
How Financial Services Fit Into Nonfinancial Platforms
At checkout, a retailer might show a payment plan or an insurance offer. Target RedCard is a familiar example: it gives customers a 5% discount on eligible Target purchases. McKinsey research cited in the source reports that conversion rates may rise from an average of 15% to 50% or more. Results vary, so this is an opportunity, not a promise.
How This Model Differs From Traditional Banking
Traditional banking usually starts with a bank. A customer visits its website or branch to explore products. Here, financial products appear in another company’s customer journey, with the bank or provider supporting the service behind the scenes.
The approach is older than apps. Ford established Ford Credit in the 1920s to lend to car buyers. Today, digital platforms bring similar options into online experiences, where users can act without starting a separate banking process.
How Embedded Finance Works: Platforms, Providers, and Partnerships
A digital offer may look simple, but several teams make it work. Sponsor banks, technology providers, and customer-facing brands each play a distinct role.
The Roles of Sponsor Banks, BaaS Providers, and End-Brands
Sponsor banks supply licensed infrastructure and can connect programs to Fedwire, ACH, Mastercard, and Visa. U.S. partners may be federal or state-chartered banks; European programs may use electronic money institutions. Sponsor banks also keep key regulatory duties and oversee partnership risk.
Banking-as-a-Service providers add tools such as card issuance, compliance support, and branded interfaces. Marqeta supports card issuance, Sila handles payment processing, and Galileo offers deposit infrastructure. End-brands include fintechs Chime and Revolut, plus Apple and Shopify.
How APIs Connect Financial Products to Digital Experiences
APIs let a platform request services from providers and show the result in its own interface. This can make bank accounts and bill pay available directly within an app. For example, Stripe Treasury works with Fifth Third Bank to support in-app accounts and bill pay.
| Participant | Main role | Examples |
|---|---|---|
| Sponsor banks | Licensed access and oversight | Fifth Third Bank; ACH |
| Technology providers | Processing and account tools | Marqeta; Sila; Galileo |
| End-brands | Present offers in their platforms | Chime; Revolut; Apple; Shopify |
Key Embedded Finance Models and Product Types
These products fit different moments in a purchase or work task. Common models include payments, banking, branded cards, lending, insurance, investing, marketplaces, and business services. Each serves distinct use cases, from checkout to company spending.
Payments, Banking, and Branded Cards
Platforms can offer payment tools, bank accounts, and digital wallets directly within their apps. For example, Marqeta and Visa can support prepaid virtual cards for buy now, pay later services such as Afterpay. The payment network and card provider help power a branded product for users.
Lending, Insurance, and Investing
Tarfin offers working capital for farm purchases, including seed, fertilizer, and grain. Farmers can buy now and pay at harvest. For protection, Airbnb offers AirCover. SoFi’s Insured Deposit Program works with banks such as HSBC Bank USA and Citizens Bank. These options bring financial services into a familiar experience.
Marketplaces and Business Services
Marketplaces can let customers compare products from several providers. Business tools serve a different need: Ramp and Bill offer company card programs with virtual and physical cards. Teams can use them to manage spending, while each platform can connect suitable products and services to its customers.
Real-World Embedded Finance Examples Across Industries
Many familiar brands now offer money tools during everyday tasks. These examples show how a timely option can fit into a customer’s routine.
Retail, E-Commerce, and Buy Now, Pay Later
American Airlines presents Citi credit card deals during flights, reaching travelers outside a bank branch. Starbucks lets app users pay with saved card details and earn rewards. At gas stations and convenience stores, SmartPay Rewards uses ACH-based bank payments.
These examples of embedded finance place payment options in settings where customers already shop or travel. The offer may feel more relevant because it appears at a useful moment.
Gig Platforms, Digital Wallets, and Business Software
Uber Cash gives riders an in-app wallet. Uber also works with Stripe, Branch, Evolve Bank, and GoBank on services for riders and drivers. Lyft offers drivers an in-app checking account and debit card, while Shopify Balance gives store owners business money tools.
Business software can connect funding to daily work, too. FreshBooks partnered with YouLend to offer revenue-based funding. Some customers receive offers and approvals on the same day. Together, these examples show how platforms can bring financial services into familiar workflows.
Benefits of Embedded Finance for Businesses and Customers
When a money tool appears at the right moment, it can make a task easier and help a business build lasting customer ties. Embedded finance can connect useful options to familiar routines.
Improving Customer Experience and Platform Loyalty
A quick payment at checkout cuts extra steps. Starbucks, for example, lets app users pay with a saved card in one tap. McKinsey quotes Sabrina Dar, Chief of Staff at Mambu, on people’s expectations for convenient, personalized experiences. A relevant offer can support that ease, while clear terms help customers trust the service.
Creating New Revenue Streams and Reaching New Customers
Lyft links driver banking to its gig platform with a checking account and debit card, giving workers a reason to stay engaged. A study cited in the source found that 63% of U.S. consumers under 35 are open to financial services from non-banks. For businesses, transaction income and access to new users may create new revenue streams. McKinsey research cited in the source reports conversion rates can rise from an average of 15% to 50% or more. These results are not guaranteed; customer trust and sound risk controls matter alongside growth.
| Benefit | Example | Potential value |
|---|---|---|
| Faster checkout | Starbucks one-tap app payment | Fewer steps for customers |
| Platform loyalty | Lyft driver account and debit card | Useful tools tied to work |
| Business growth | Relevant offers within an app | More conversions and income |
Embedded Finance vs. Banking as a Service and Open Banking
These terms describe different parts of a digital money experience. Embedded finance is the customer-facing offer, while banking as a service (BaaS) and open banking provide tools or data that can support it.
How BaaS Enables Embedded Financial Services
BaaS providers connect brands with banking capabilities through APIs and bank partnerships. A brand can then offer account features or cards in its platform without becoming a bank.
For example, Stripe Connect supports payments and payouts among multiple parties. Stripe Treasury offers bank-like features through partnerships, including one with Fifth Third Bank. Banks retain key duties, while providers supply technology.
How Open Banking Data Can Support Embedded Finance
Open banking lets users grant secure, permission-based access to their bank data through APIs. Unlike BaaS, it focuses on data sharing, not on placing products in a nonfinancial platform.
In Europe, the revised Payment Services Directive (PSD2) is a key open-banking regulation. The global market was valued at $25.14 billion in 2023, with a projected 27.4% annual growth rate through 2030.
With a customer’s permission, data may help verify an account, guide payment decisions, or support a lending review. Clear consent and limited access can help manage risk.
How Businesses Can Offer Embedded Finance Solutions
Adding money tools takes more than choosing a product. Businesses must decide how to connect it to daily work and support customers over time.
Choosing Whether to Build, Partner, or Buy
Building in-house gives a business more control, but it takes time and banking expertise. Buying a ready-made system can speed up launch, though it may limit changes. A partnership can help a company offer embedded financial services without creating bank accounts or payment systems from scratch.
Selecting Providers and Designing the Customer Journey
Unit and Checkout.com help companies connect with banks and add financial products through APIs. Plaid Transfer combines payment authorization, risk analysis, and money movement in one API. This can help platforms offer embedded options in a familiar flow.
Place each offer where it fits the task. Explain consent, fees, terms, and next steps in plain language. One reported example: YouLend’s partnership with Plaid’s Open Banking network enabled 3X faster insurance application processing and a 90% approval rate.
| Approach | Best fit | Main trade-off |
|---|---|---|
| Build | Teams needing control | More time and technical work |
| Partner | Businesses seeking provider support | Shared oversight and dependencies |
| Buy | Companies needing a faster launch | Less room for customization |
Risk, Compliance, and Security Considerations
Trust depends on more than a smooth app. An embedded finance program must protect people, limit fraud, and meet legal duties. Rules can vary by product and state.
Managing Bank Partnerships, KYC, and AML Requirements
Sponsor banks retain major regulatory duties for fintech relationships. They may require Know-Your-Customer (KYC) checks and anti-money-laundering (AML) controls. Agreements should assign oversight tasks to banks and providers, while banks set standards for partner reviews.
Financial institutions and businesses should consult qualified legal and compliance professionals before launch. Duties depend on the product and the markets served.
Protecting Customer Data and Reducing Fraud
Clear disclosures help customers understand product terms and how providers handle personal data. Strong privacy safeguards also reduce the risk of misuse.
- Verify identity before opening accounts or issuing cards.
- Monitor payments for unusual activity and possible fraud.
- Set clear steps for reporting and escalating security events.
These controls support safer services and help users know what to expect.
| Control | Purpose | Typical owner |
|---|---|---|
| KYC and AML checks | Verify identity and flag suspicious activity | Bank and provider |
| Data safeguards | Protect private information | Business and provider |
| Fraud response | Review alerts and escalate cases | Assigned program teams |
Embedded Finance Market Growth and Emerging Trends
More daily tasks now happen online, creating new places for useful money tools. The embedded finance market grows as digital platforms connect people with services during routine activities.
Market Expansion and the Shift to Digital Services
The World Bank reports that two-thirds of adults worldwide make or receive digital payments. In developing economies, the share rose from 35% in 2014 to 57% in 2021. The COVID-19 pandemic sped up online activity, from shopping to major life events. This shift created more moments for relevant offers and new revenue streams.
Partnerships also helped shape the market. Under the Durbin Amendment, smaller banks could receive higher debit interchange rates than larger banks. That made some smaller institutions appealing partners for fintech startups seeking to launch payment products.
Personalization, Embedded Investing, and New Partnerships
Looking ahead, companies can use customer preferences to present suitable options, including investing tools within digital platforms. Banks, technology providers, and brands may form new partnerships to reach people in context. Clear terms and careful risk checks remain vital as these services expand.
| Trend | Market impact | Example opportunity |
|---|---|---|
| Digital payments | More people use online transactions | Offer payment choices in an app |
| Bank partnerships | Smaller banks attract startup programs | Support card and account products |
| Personalized services | Offers can match user needs | Present investing options in a platform |
How to Evaluate Embedded Finance Opportunities
A strong opportunity solves a real customer problem and fits the platform’s daily flow. Start by finding where users face delays, confusion, or extra steps.
Assessing Customer Needs, Costs, and Revenue Potential
Consider whether payment tools, lending, or other financial products address that friction. Check likely use cases and how the offer may affect the customer experience. A clear need matters more than a broad market forecast.
Compare three ways to launch: build, partner, or buy. Weigh setup costs, staff expertise, compliance duties, and time to market. Review providers for reliability, data security, customer support, and readiness to meet rules. Make sure the service can change as needs shift.
- Estimate adoption, transaction volume, fees, and ongoing service costs.
- Set targets for customer outcomes and potential revenue streams.
- Confirm teams can update the offer and resolve customer issues.
McKinsey research cited in the source reports conversion rates may rise from an average of 15% to 50% or more. Treat this as context, not a promise. Test the offer, track results, and revise it before scaling to seek sustainable new revenue.
Conclusion
Target RedCard and Uber’s in-app tools show how embedded finance can place useful products inside digital routines. Sponsor banks, BaaS providers, and end-brands must align infrastructure, customer experience, and regulatory duties.
Relevant payment, lending, or insurance options can meet customers at a useful moment. Clear terms and strong data safeguards protect trust. Each bank partner should define who handles key tasks, and a bank should oversee its required controls.
Before launch, a business should assess customer demand, provider capabilities, risk controls, and likely revenue. A sound finance program solves a real need rather than adding features for their own sake. As digital payments grow and expectations shift, partnership-led financial services can support better banking and a simpler experience.