What is Embedded Finance? A 2025 Beginner's Guide to a Financial Revolution

How EmFi Works

To understand how embedded finance works, it is crucial to explore the three main players that make up its ecosystem: providers, enablers, and embedders.

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There are three key categories of players within the EmFi value chain: provider, enabler and embedder. 

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Provider

• This refers to large banks, small finance banks, non-banking financial institutions and startups which provide financial services like payments, lending and insurance.
• Manages regulatory risks, credit risks and compliance risks and offers access to loans, payments, and insurance products.

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Enabler

• This refers to companies that build applications to enable and support embedders and providers in activities like credit scoring, payments, data security, connectivity and insights.
• Credolab, for example, offer risk, fraud and marketing solutions all via a single Application Programming Interface (API) to connect embedders with providers to enable distribution in areas such as credit, payments, compliance, data connectivity and Know Your Customer (KYC). 
• In some cases, enablers can also provide financial services directly to the embedder.

Embedder

• This refers to non-financial businesses that own the website, mobile app, and other customer-facing digital platforms that intend to embed finance offerings in their platforms and marketplaces.
• Permits services such as Business-to-Consumer (B2C) shopping, the gig economy and Business-to-Business (B2B) procurement.

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Together, these participants create a dynamic ecosystem that defines how embedded finance works, ensuring financial services are integrated securely and efficiently within everyday digital platforms. 

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Previously, each player had a distinct role. Now, with the advancement of technology and the market, players compete with each other to gain higher revenue by growing across the value chain. 

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As a result, these three individual categories start to overlap and lead to a multi-directional exchange. 

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This evolution highlights the growing importance of embedded financing, in which traditional banking services are seamlessly delivered through non-financial platforms, enabling faster credit delivery and improved accessibility for consumers and businesses alike.

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With EmFi, all participants in the ecosystem can offer customers the services they need to improve their experience in a secure, simple, and cost-effective manner through a single interface. 

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Stripe, for example, has partnered with Goldman Sachs and other banks to offer embedded financing to third-party platforms and marketplaces. 

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Apple Card also partnered with Goldman Sachs to allow iPhone users to apply digitally (integrated with Apple Pay and the device's Wallet app). 

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In this way, cashback on purchases and interest-free purchases are offered with no fees and no handling charges.

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Embedded Finance Examples 

To better understand how embedded finance works in practice, let us explore key examples across categories such as payments, banking, lending, insurance, and investments, along with their advantages, before diving into the value chain. 

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The key categories of EmFi include, but are not limited to:

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Embedded Payments

Enables real-time detection of chargebacks and transaction fraud through continuous monitoring and behavioural analytics. This not only safeguards revenue but also strengthens customer trust and platform reliability.

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Embedded Banking

Seamlessly reduces first- and third-party fraud during onboarding by verifying identity and transaction patterns in real time. This creates a secure environment for users while maintaining a frictionless experience for genuine customers.

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Branded Payment Systems

These systems allow companies to offer their own branded financial services, such as digital wallets or co-branded cards, directly within their ecosystem.

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By doing so, businesses strengthen customer loyalty, gather richer behavioural insights, and gain greater control over transaction data. This integration enhances the user experience by keeping payments secure, fast, and consistent with the brand identity.

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Embedded Buy Now, Pay Later (BNPL) Instalment Plans

Embedded BNPL solutions integrate flexible instalment options directly at checkout, allowing customers to split payments effortlessly without leaving the platform. 

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This convenience increases conversion rates and average order value while enabling faster and more responsible financial decisions. 

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For businesses, it offers a way to attract new customers, improve affordability, and enhance overall user satisfaction.

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Embedded Lending

Enhances credit risk assessment using behavioural and transactional insights, even for customers without a credit bureau history. By leveraging alternative data, lenders can make faster, more inclusive, more predictive and more accurate credit decisions.

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Embedded Investing

Simplifies the integration of investment tools across different platforms, making wealth management more accessible. It allows users to invest seamlessly while enabling businesses to expand their financial service offerings.

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Embedded Insurance

Boosts cross-sell and upsell opportunities by offering tailored coverage within existing customer journeys. It helps financial institutions retain users through contextual, data-driven offers that match real-time needs.

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What's Driving Embedded Finance?

Shift to E-commerce

The rapid growth of e-commerce has made embedded finance a natural extension of the digital shopping experience. 

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By integrating payments, credit, and insurance directly into online platforms, businesses can offer smoother, faster, and more personalised checkout journeys that drive higher conversion rates.

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Advances in Technological Integration

API-driven ecosystems and cloud-based infrastructures have made it easier to embed financial products within non-financial platforms. 

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These integrations enable real-time data exchange, predictive insights, and secure transactions, creating the foundation for scalable and efficient financial innovation.

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Changes in Consumer Expectations

Modern consumers demand convenience, speed, and personalisation in every interaction. Embedded finance meets these expectations by delivering financial services exactly when and where users need them, whether that is during shopping, travel booking, or subscription management.

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Reaching the Underserved

Embedded finance provides access to financial tools for individuals and small businesses traditionally excluded from formal banking. 

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By leveraging alternative and behavioural data, it enables more inclusive lending, insurance, and payment options that drive economic empowerment and financial equality.

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Pros and Cons of Embedded Finance

Embedded Finance (EmFi) integrates payments, lending, insurance, and investments into non-financial platforms, reshaping how users access financial services.

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Pros:

• Enables seamless access to payments, credit, and insurance within familiar digital environments.
• Enhances convenience and user experience by reducing friction across transactions.
• Encourages smarter financial decisions through behavioural nudges like flexible payments or insurance add-ons.
• Builds customer trust and loyalty while expanding access for underserved groups.
• Helps businesses diversify revenue streams and strengthen engagement.

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Cons:

• Integration complexity increases when coordinating multiple financial and tech partners.
• Regulatory and compliance requirements add operational challenges.
• Data privacy and security concerns demand strong protections.
• Over-monetisation risks damaging user trust.
• Dependence on third-party providers introduces reputational and operational vulnerabilities.

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The Growth of Embedded Finance

Forbes estimates EmFi will generate $230 billion in revenue by 2025 globally, an increase of tenfold from $22.5 billion in 2020. 

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The Latin America (LATAM) region is growing more rapidly than other regions, and a report by ResearchAndMarkets states that the LATAM embedded finance market was valued at USD 9.8 billion in 2024 and is projected to reach USD 34.5 billion by 2029, at a CAGR of ~28.6%.

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Collaborations, however, are crucial, especially in LATAM, where banks still need help with technologies and interfaces. Non-financial businesses that cannot yet provide financial services can also benefit from this. 

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Furthermore, EmFi is poised to flourish as government regulations improve and frameworks are brought in due to peak customer demand. 

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Increasing products and service delivery with a strong user experience and little resistance is expected to, in turn, increase cross-sector strategic alliances in LATAM over the upcoming quarters. 

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For example, Pomelo builds state-of-the-art fintech infrastructure that enables businesses to create a fintech business and launch cards “much faster” across LATAM. 

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With its launch in 2020 in Argentina, Pomelo has quickly expanded into other countries in LATAM, including Brazil, the trophy country.

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"The adoption of EmFi solutions will increase as the use of digital solutions increases. With smartphone penetration already high, COVID simply fast-tracked the adoption of digital services that are now part of people’s everyday life.”

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By Peter Barcak, Founder and CEO of Credolab

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What Is the Reason for Its Increasing Popularity?

Fintech infrastructure and online integrations have matured immensely since the recent global pandemic. Due to the increasing reliance on digital services, users have become accustomed to online shopping and experienced the convenience of one-stop shopping. 

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Crucial changes in commerce, merchant and customer behaviour, and technology have also enabled this progress:

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1. The Digitisation of Commerce and Business Management: The COVID-19 global pandemic heightened digital commerce for B2B and B2C buyers. Customers have sampled the convenience of e-shopping and experienced its benefits.

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According to a McKinsey report, 33% of global card spending takes place online, which means businesses must be prepared to meet this demand and win in that space. 

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Customers expect a seamless experience with personalised messages and products, plus a multi-channel and multi-touchpoint experience. 

2. Fintech Infrastructure: The revolution of Open Banking via Financial APIs offers the secure exchange of banking data. 

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This enables the communication between third parties and online banking systems to retrieve customers’ banking data and carry out transactions, accessing inactive demand.

3. The Rise of a New Digital Generation: The digital native generation expanded the number of customers and businesses using digital platforms for all their financial needs. 

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This includes the millennial generation and those who came after, who make up over a third of the workforce today. Over the next decade, it is expected to reach 58%, making this generation the most dominant in the workplace.

4. Lower Digital Customer Acquisition Costs: According to Dealroom, acquiring a customer for a bank or insurance costs four times more than e-commerce. Hence, banks and insurance companies are more inclined to embed offers into consumers' existing digital mindsets and behaviours to minimise customer acquisition costs. 

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By combining user and behaviour data with payment data, customers can receive bespoke services tailored to personal needs and circumstances. 

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Because these customers already have relationships with the company, they are more likely to purchase the recommended offers. As a result, these businesses have significantly lower customer acquisition costs than traditional banks.

5. Acceptance Rate Is Already High: Based on a survey by Solarisbank, 15% of customers are prepared to use a checking account from a non-financial service, and 61% can envisage using an integrated financial service. 

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As the convenience offered by EmFi is the catalyst for this increased customer demand, these percentages are no surprise. New players are encouraged to compete in this market because of the high acceptance rate.

6. Partnership Ecosystem: EmFi has also been able to grow through the increasing number of partnerships that arise from “super apps”. More parties are exploring partnerships to leverage and expand multiple financial services into one everyday-use service. 

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The Future of EmFi‍

EmFi offers financial businesses the opportunity to establish important partnerships with non-financial businesses. 

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For B2B marketplaces and e-commerce platforms, choosing the right partner is crucial to driving payments or offering credit terms to their customers. 

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Making the right decision for the future can be challenging, and a partnership's full integration into a business makes it even harder to change. 

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However, as these partnerships progress, EmFi will become more prevalent. A wide range of businesses, including retailers, travel, and software firms, have started adopting EmFi into payment services to improve accessibility. 

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Dealroom describes EmFi as a "multi-trillion-dollar opportunity" that generates more potential than the combined total of all fintech startups and top global banks and insurers. By 2030, EmFi is predicted to reach $7.2 trillion, twice the combined value of today's top 30 banks and insurers.

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Predictions and Insights 

“In the next few years, we will see Embedded Finance(EmFi) expand into various sectors: Education, Healthcare, Real Estate and Agriculture. All are attractive in terms of the size of the opportunity as well as the potential to offer innovative EmFi products. 

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We will also see increasing partnerships of Fintechs with leading consumer brands and leveraging Open Banking APIs to integrate EmFi within the overall customer journey.”

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By Bharath Kumar Vellore, General Manager of APAC at Provenir

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In the Education Technology (EdTech) sector, global policies have helped students gain greater access to loans. 

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Unfortunately, these often come with high-interest rates, which negatively affect the financial health of students. EmFi and its access to deep customer analytics make it possible to more accurately evaluate a student's ability to repay loans and lend accordingly. 

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In the healthcare industry, patients are hindered or delayed in receiving treatments because of high costs, lack of transparency in pricing and payment options. 

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EmFi can make the healthcare industry more profitable by decreasing costs, connecting and providing flexible and convenient payment options while simultaneously solving these issues.

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According to a report by Bain, different industries show varying maturity levels in EmFi. Retail, e-commerce, food and mobility show a high degree of growth, while industries including real estate, travel and health are still in their early phases. 

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These differences are directly related to barriers, including regulations, compliance, and the digitisation of services. Despite the slow advancement of some industries, there is still tremendous potential for growth.

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Therefore, it is no surprise that Venture Capital (VC) investments are expressing a deeper interest in this sector. According to Statista, VC investments in EmFi skyrocketed in 2021, gaining a value of $4.25 billion, which is almost three times more than in 2020. 

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Thus, businesses constantly seek partnerships to expand business models and raise VC investments.

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Revolution of EmFi in the Financial Sector

Today's business environment emphasises delivering a superior customer experience, valuing customer time, and building a seamless ecosystem for the customer. EmFi enables businesses to understand customers' habits and needs better, thereby driving business development. 

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Simultaneously, fintechs have evolved due to new customer and provider relationships, increased revenue streams, partnerships, and competition from previously unrelated industries.

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However, EmFi is only just beginning its transformation in the financial sector. With increasing recognition of customer needs, businesses will adapt business models to maximise revenues and deliver the best customer experience.

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The New Normal for Financial Services

EmFi is no longer a passing innovation; it represents a structural shift in how financial services are designed, delivered, and consumed. 

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By embedding payments, lending, insurance, and investments into everyday digital experiences, EmFi transforms platforms into complete financial ecosystems. 

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Businesses gain new revenue opportunities, while consumers enjoy convenience, trust, and seamless access to services that were once disconnected.

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Looking ahead, finance will become increasingly invisible, woven effortlessly into the digital platforms we use daily.

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From ordering groceries to booking travel or subscribing to entertainment, financial services will operate quietly in the background, making interactions faster, smarter, and more personalised. 

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The future of finance is not about where we bank, but how seamlessly finance integrates into our lives.

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FAQs

What Is the Difference Between Integrated and Embedded Payments?

Integrated payments connect a payment gateway to a platform, while embedded payments are natively built into the user journey, eliminating redirects or third-party steps.

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What Is the Difference Between Open Finance and Embedded Finance?

Open finance focuses on secure data sharing between institutions; embedded finance focuses on delivering financial services within non-financial platforms.

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What Is an Example of an Embedded Payment?

Ride-hailing apps that let users pay automatically after each trip are examples of embedded payments.

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What Is the Difference Between DeFi and Embedded Finance?

Decentralised Finance (DeFi) operates on blockchain without intermediaries, while embedded finance integrates traditional financial services into mainstream apps.

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How Big Is the Embedded Finance Market?

According to industry forecasts, the embedded finance market could surpass $600 billion in value by 2032, reflecting its accelerating global adoption.