Long reads

Why embedded finance isn’t about finance

Annerie Vreugdenhil

Annerie Vreugdenhil

Chief Innovation Officer, ING

Financial services. For centuries, they were a birthright for banks only. Tough restrictions made it impossible for others to offer them, making banks the only game in town. Enter embedded finance, and now any brand can offer financial services to its customers.

Chances are you’ve already experienced it – in food delivery, taxi services, or shopping apps. When your taxi app automatically pays for your ride, or you buy online purchases in instalments, this is part of a process called embedded finance.

Although not new, the concept has taken off in the past few years as banks and tech companies look for ways to create more convenient and customised experiences for their customers.

A concept comes of age

In the early 2000s, an influx of start-ups entered the financial industry. These newcomers took apart banking services and improved them, making them more customer-friendly – a phase known as the ‘unbundling of finance’. Banks went on the offensive. Until both sides realised that for the sake of their customers, they should cooperate rather than compete. So the great ‘re-bundling of finance’ began – piecing banking services back together. Only now, they’re not just found in banks, but in other, non-financial companies too.

The advent of open banking paved the way for these trends. The increased use of application programming interfaces, better known as APIs, made it easy for companies to embed financial services into their customer journeys to offer richer propositions.

Although this progress is most visible in payments, embedded finance is racing ahead in other areas like insurance, lending, wealth management and stock trading. In 2030, the embedded finance market is set to capture more than seven trillion dollars in value.

Who runs the world? Customers

As more people grow comfortable with digital services, brands are expected to weave financial services into their business models. Tesla, for example, has developed an in-house insurance programme offering customised coverage and a convenient monthly payments service to its customers. Ecommerce platform Shopify has partnered with payments provider Stripe to allow consumers to open bank accounts directly on its platform.

It’s not just retail customers who benefit from broader integrated services. Stripe Treasury works with Citigroup, Goldman Sachs and other banks to offer banking services to online businesses.

So where does this leave banks?


Banks are well-positioned to increase their market share – they are the main license holders in a highly regulated environment and they can expand on existing platform strategies. The question is: will the winning approach be to get closer to customers’ needs and provide for them better than anyone else, or to make it easier for others to solve their customers’ needs?

One thing is certain: we live in a time when people may not be aware who is providing a financial service. Nor do they particularly care about what’s happening ‘behind-the-scenes’. What people care about is more convenient, customised experiences, which is exactly what embedded finance is about.

The approach of getting closer to customer needs is attractive for banks: either by developing services itself or by connecting partners to the bank’s own digital platform. Especially as banks hold a very strong card to play: their digital platforms have huge traffic. Many people look at their banking app multiple times per week. How many services can claim that…

Comments: (3)

A Finextra member
A Finextra member 05 October, 2021, 18:48Be the first to give this comment the thumbs up 0 likes

So true.  It also heralds the rise in popularity of those firms who are expert at weaving the banks' services into the fabric of the customers' experience.

Martyn Wallen
Martyn Wallen - quantum six - London 06 October, 2021, 09:361 like 1 like

Nice article Annerie, very clearly explained to those that dont necessarily understand embedded finance, and as you say its about the customer and customer experience, those that focus on this as the outcome will be best positioned.

A Finextra member
A Finextra member 06 October, 2021, 10:041 like 1 like

Agree, it's what I've described as Experience Driven banking for years, the focus has to be Customer Journeys, and banking is not a Customer Journey. Would love to discuss further