By Ebenezer YALLEY
Imagine a world of frictionless transactions where payments, lending, financing and insurance is done by providing seamless, in-platform transactions, allowing customers to complete their purchases without being redirected to external payment gateways.
Embedded finance makes this possible by integrating financial services (payments, lending, insurance, etc.) into non-financial platforms such as e-commerce, telecom, agriculture, and logistics creating a seamless user experience.
Embedded finance refers to the integration of a host of banking and other financial services into the apps and services of companies outside of the finance industry.
For example, an option at many retail stores that customers must buy now, pay later (BNPL) is based on seamless third-party loans given at the point of sale.
According to Global Market Insights, embedded finance market was valued at US$104.8 billion in 2024 with an estimated compound annual growth rate (CAGR) of over 23.3percent from 2025 to 2034.
Potentially, it could reach US$834.1 billion by 2034. This shift is blurring the lines between banking and everyday consumer experiences, creating a US$7 trillion global opportunity by 2030 (according to Bain & Company).
Embedded finance is achieved through companies incorporating banking, lending, insurance, and investment services with their customer offerings through application programming interfaces (APIs) that are linked to financial partners.
Because APIs and smartphones are common, consumers can get their banking services wherever they are. In turn, companies gain greater customer loyalty and more revenue streams.
Interestingly, inserting financial products or services into non-financial company transactions is not new. For example, many car companies began offering direct-to-consumer auto loans and financing options decades ago. Store-branded charge cards offered by department stores and other retailers are as old as mass-market credit services.
Embedded finance has gained prominence, first as a term in the mid- to late-2010s and then due to changes in fintech and retailing apps. These changes include competition from innovative players, evolving customer expectations, the unbundling of traditional banking functions for many, the prominence of APIs and software as a service (SaaS) models and the pursuit of new market opportunities.
Key Examples of embedded finance platforms include payment offerings such as Shopify Balance and Uber Instant Pay, credit products such as Amazon lending and insurance platforms such as Tesla’s embedded car insurance.
Embedded finance represents the future of financial services as consumer demand for frictionless finance is at an all-time high. According to research by McKinsey, 73percent of consumers prefer to manage finances where they shop. Early adopters of digital financial solutions such as millennials expect instant app-based financial services which embedded finance platforms offer.
In the current commerce ecosystem, businesses continue to monetize financial services with companies such as Walmart, IKEA, and Apple offering loans, payments, and cards. Super app offerings such as Grab, WeChat and Revolut combine shopping, banking, and lifestyle services which serves as a value chain to achieve revenue targets.
So, what are some of the key drivers boosting the rise of embedded finance solutions and offerings? The answer lies in examples of current global regulatory and tech enablers such as open banking, which enables third-party providers to access customer banking and financial data through APIs, AI & Blockchain. Open banking keeps on improving risk assessment as well as fraud prevention across digital financial services platforms.
There are many other factors that are driving the rise of embedded finance platforms across the markets where the offering is present. The digitalization of commerce has paved the way for embedded finance platforms to emerge, as businesses integrate financial services within their digital platforms for a single customer experience. In many markets, e-commerce merchants offer BNPL financing, branded credit cards, and rewards programs in their checkout flows to boost sales. On-demand platforms like ride-hailing apps and freelance marketplaces also provide digital wallets, payments, and wealth management tools to attract producers and consumers.
With the rapid development of fintech and APIs, integrating financial services into non-financial platforms has become more workable and scalable. Digital onboarding, electronic Know Your Customer (KYC), and real-time data connections make authenticated transactions fast and far easier for the customer. APIs enable Software as a Service and subscription services to incorporate flexible payment options, in-app invoicing, and lines of credit for business users which also boost the scaling of embedded finance offerings.
It is imperative to note that consumers are increasingly becoming comfortable using non-traditional providers for financial services, driven by a desire for convenience and streamlined experiences. The availability of smartphones, fintech apps, e-commerce, and digital banking has helped brought about these changes in consumer attitude which embedded finance leverages on.
The role of embedded finance as an enabler for financial inclusion is also an important factor since it provides the means for the underserved to enjoy financial services. Embedding finance into everyday transactions democratizes finance and expand access to financial products. Behavioral economic approaches where embedding insurance options right into, say, a ride-sharing transaction and making other choices easier could help those who may not have the time or knowledge to seek out such services separately.
The preceding points paints a clear picture about the benefits of adopting embedded finance as a strategy to promote the use of financial services. The insights shows that usage of embedded finance platforms portend a lot of benefits. For instance, companies that offer financing, risk coverage, bank accounts, and money transfers are a one-stop shop that meet many customers financial needs customized to services and products.
Another benefit of embedded finance is that customers enjoy greater convenience and save time when they can make a purchase in one ecosystem that streamlines identity checks, makes payments faster, and completes a transaction. Embedded finance also allows retailers, platforms, Software as a Service firms, and other businesses to expand their portfolio of products to serve customers better in one place. Providing loans, insurance, and payments builds a marketing relationship beyond one-off transactions.
Embedded finance despite the benefits it comes with also has certain drawbacks such as complexities in integrating with one or several financial services partners through APIs and ensuring reliable connections and data sharing across different systems. Integration sometimes opens the door for hackers and can increase the potential for system outages, performance lags, and cyber breaches.
Another drawback is that building an all-encompassing financial experience across too many domains too fast can overwhelm customers and possibly erode trust. That can be true if promises of seamlessness and convenience are not fulfilled. Or if consumers perceive that the company they trust is trying to get at their wallet in other ways through opt-outs, checkboxes, and the like when they simply want to make a purchase. This also has the propensity to create a situation of confused positioning in the minds of customers.
By embedding regulated financial activities like lending, payments, and investments into a single platform, inheriting compliance rules for customer identification, data usage, privacy protection, transparency disclosures, equity access, and fair lending is key. Compliance with regulatory prescriptions is also important to ensure that the roll-out of services does not go against the required laws.
In conclusion, it can be argued that despite the identified challenges, embedded finance is no longer a futuristic concept as it is already with us, enhancing user experiences across e-commerce, gig work, travel, healthcare, real estate, and more. The next wave will undoubtedly involve AI-driven personalization, blockchain-based smart contracts, and deeper IoT integrations.
>>>the writer is a seasoned expert in Fintech, Digital Transformation, and Payment Systems, with over a decade of experience across the Banking and Fintech sectors in multiple organizations throughout Africa. He is deeply passionate about digital financial services, and has cultivated strong expertise in revenue assurance, marketing, product development, project management, and key account management, consistently delivering innovative and impactful solutions in the financial technology space.
