Picture calling a taxi, shopping at the grocery store, or planning a vacation and being offered a loan, insurance, or rewards card within the same app. There are no banks involved in this process. No forms. No hassle.
That’s Embedded Finance. And it’s revolutionizing the whole Banking, Financial Services, and Insurance (BFSI) landscape quietly.
Those were the days when financial services used to be confined to banking branches or mobile apps. Now, they’re being integrated seamlessly into non-banking platforms, ride-sharing apps, e-commerce sites, SaaS tools, and even healthcare portals. What does the future hold? It’s only going to become more integrated.
Let’s examine how embedded finance is revolutionizing BFSI from the backrooms and why doing nothing about it could mean staying behind.
What is Embedded Finance?
In essence, Embedded Finance is offering financial services within non-financial platforms or products. Imagine banking as a plug-in.
You have probably already experienced embedded finance and didn’t even know it:
- Using the app to book an Uber ride results in integrated payments.
- Flipkart’s “Buy Now, Pay Later” features equate to embedded lending.
- Purchasing flight insurance in addition to your ticket equates to integrated insurance.
The magic? It’s invisible, intuitive, and instant.
Why Is Everyone Talking About It Now?
Although the idea isn’t new, the integration of API innovations, open banking, fintech collaborations, and regulatory technology has simplified it more than ever for non-financial businesses to include financial functions.
In short, you don’t have to be a bank to provide banking-like services anymore.
Here’s what’s fuelling this momentum:
| Driving Factor | Explanation |
| Open Banking | APIs allow third parties to access banking infrastructure. |
| Consumer Expectations | People want frictionless, all-in-one experiences. |
| Fintech Growth | Agile fintechs provide financial solutions that are modular and easy to use. |
| Data-Driven Decisions | More platforms have access to customer behavior and transaction history. |
Major Segments of Embedded Finance
Let’s break it down. Here are the most popular applications of embedded finance in action:
| Segment | What It Offers | Example |
| Embedded Payments | In-app or invisible payments | Apple Pay, Amazon Pay |
| Embedded Lending | Instant credit or EMIs at checkout | ZestMoney, LazyPay |
| Embedded Insurance | Micro-insurance integrated into services | Ola trip insurance, MakeMyTrip flight protection |
| Embedded Investing | Easy access to stocks or mutual funds | Groww via WhatsApp, Amazon offering gold investments |
| Embedded Banking | Full-service banking via a non-bank app | Neobanks partnering with brands like RazorpayX |
The Real Impact on BFSI Players
- Legacy Banks
Challenge: Loss of customer ownership and visibility.
Opportunity: Collaborate with platforms, enabling them from the backend (BaaS – Banking-as-a-Service).
Legacy banks are slowly realizing that experience matters more to consumers than providers. That is, banks have to transition from being product firms to platform partners.
- Fintechs
Challenge: Regulation, risk, scale.
Opportunity: They design embedded finance. Their API-first models are empowering everyone from e-commerce players to edtech platforms.
Fintechs function as intermediaries between established financial institutions and digital brands, enabling a seamless financial layer.
- Insurers
Challenge: Direct-to-consumer traction is difficult.
Opportunity: Embedded insurance can transform policies into a simple and straightforward add-on.
Embedded insurance allows for significant micro-premium models with low customer acquisition costs, ranging from selling accident insurance during cab rides to offering health top-ups through fitness apps.
- Consumers
Challenge: Transparency and data protection.
Opportunity: Convenience, personalization, and access.
Benefits of Embedded Finance
| Stakeholder | Benefits |
| Consumers | One-click access, reduced friction, contextual finance, better UX |
| Non-Financial Brands | Deeper engagement, increased revenue per user, data enrichment |
| Financial Institutions | New distribution channels, lean operations, partnerships |
Real-World Examples of Embedded Finance
- Amazon Pay Later: Provides credit to customers at checkout without them ever having to deal with a bank.
- Ola Insurance: Automatically opts users in for trip insurance; easy to cancel in one click.
- Shopify + Stripe: Shopify merchants can offer embedded payments and lending using Stripe’s capabilities.
- Zomato Gold: Dining subscription with built-in payment and credit facilities.
Risks & Challenges
Embedded finance sounds like magic—but it’s not without risks.
Compliance & Regulation
Who owns the customer? Could you clarify who holds the liability when issues arise—the platform or the bank? Regulators across the globe are just catching up.
Data Security
Embedding financial services within other apps makes data more vulnerable, particularly if platforms don’t have strong security protocols.
Overload & Complexity
There can be too many embedded services, which can overload users. For instance, offering loans or insurance at each and every digital touchpoint might create fatigue or suspicion.
How BFSI Leaders Can Prepare
If you’re a BFSI professional, the key is to collaborate, not compete. Here’s a simple roadmap:
- Partner with Platforms: Don’t just be a service provider. Look at co-branded products or white-label APIs.
- Modernize Infrastructure: Cloud-first, API-ready infrastructure is a requirement.
- Customer Journey Focus: Create products that fit in, not stand out.
- Get Regulatory-Ready: Make sure your embedded propositions comply with changing regulations, particularly around data exchange and KYC standards.
Final Thoughts: It’s Not the Future—It’s the Present
Embedded finance is no longer a “nice-to-have.” It’s the plumbing behind every exceptional digital experience. BFSI players face a decision: do you want to drive the future or succumb to its influence?
In a world where your grocery app contains the bank account and insurance is purchased on a yoga platform, embedded finance isn’t a trend—nor is it any longer an emerging technology. Embedded finance has become the new norm.
So whether you’re an insurer, fintech founder, banker, or investor, it’s time to join the invisible revolution.
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