The Bundling Era of Embedded Finance: Fragmentation to Frictionless

The fintech space is transitioning from a decade of unbundling, where every function needed a separate service, to a new era of bundling, where embedded finance is revolutionising how small businesses access banking services. Tech platforms like Shopify, Uber Eats, and eBay are becoming the new distribution points for personalised, frictionless banking, right where the customer already is. 

From fragmentation to fusion: How embedded finance is ending fintech's unbundling obsession

For a decade or more around the 2010s, the fintech industry focused on specialisation. The presiding ethos was that a jack of all trades is a master of none, and fintech startups, aiming to reach the top in their chosen specialism, targeted individual banking services with laser focus. Payments, lending, wealth management - each became a separate app, a distinct relationship, and another login for users to manage.

Flash forward to 2025, and the industry has come full circle. Today's winning strategy is bundling financial services directly into platforms where customers already work and transact. This embedded finance-driven shift from fragmentation to fusion will fundamentally reshape how small businesses access capital, manage payments, and grow their operations, and represents a $690 billion opportunity by 2030 according to some forecasts.

Why bundling; why now?

While the specialised strategy drove the early success of the fintech sector - venture funding for fintechs rose from $3.7 billion in 2013 to $16.5 billion in 2017 - in the longer term, it forged a fractured financial landscape. Market saturation, customer fatigue from managing multiple financial relationships, and the harsh economics of customer acquisition costs all started to bog down this previously winning strategy.

To remedy this, platforms are now embedding financial services directly into their ecosystems. Take Vagaro as an example. The beauty, wellness and fitness platform now offers revenue-based financing to over 200,000 salons, fitness professionals and other wellness service providers all within the dashboard that their users are familiar with.

Likewise, eBay, which Liberis partners, is an exemplar of the benefits of embedded finance adoption. Thousands of sellers can now access pre-approved funding, with 65% receiving funds within one business day.

Bundling is reshaping competitive dynamics

For platforms, embedded finance delivers compelling economics. Payrix data indicates that revenue per user increases 2-5x when financial services complement core offerings. Customer acquisition costs for embedded finance leads can run as much as 15-20x lower than traditional financial services marketing, according to one McKinsey & Company study. And, perhaps most importantly, platforms offering integrated financial services report higher customer engagement and dramatically reduced churn.

As this trend develops, rather than fighting it, traditional banks will be key to enabling its progression by partnering with fintechs to enhance their offerings. Through Banking-as-a-Service partnerships, banks can provide the regulatory infrastructure, capital, established customer relationships and vast datasets, while platforms and fintechs contribute technological innovation, specialised capabilities, and agile development. While the industry isn’t quite there at the time of writing, this kind of collaborative model can be a powerful force for innovation in financial services offerings, particularly for smaller businesses.

Reduced financial friction for small businesses

For small businesses, having financial products embedded within the ecosystems they’re already using to run their businesses is the ultimate convenience. Users can now manage payments, access capital, and handle banking within the platforms they use daily. No more switching between applications, reconciling multiple accounts, or maintaining relationships with numerous providers. This consolidation saves time, reduces errors, and enables businesses to focus on growth rather than financial administration.

The road ahead

The embedded finance market's projected growth is startling and reflects a fundamental shift in financial services delivery. As AI capabilities advance and regulatory frameworks mature, we'll see even deeper integration of financial products into day-to-day business operations.

This isn’t a return to traditional banking's one-stop-shop model. Instead, it represents a new environment where financial services become invisible infrastructure, powering commerce at the point of need. For small businesses navigating an increasingly digital economy, embedded finance offers something invaluable: the ability to access sophisticated financial services without leaving the platforms they rely on for their daily operations.

The unbundling decade asked customers to choose best-in-class point solutions. The embedded finance era delivers something better: comprehensive financial services that just work, exactly when and where they're needed.