In simple terms, embedded finance is financial/banking services by a non-financial/banking services provider. Some key examples include digital wallets, payments, and lending services. For many banks, the rise of these offerings represents a threat and perhaps brings an urge to re-evaluate their products, modernize their services, and invest more in customer loyalty.

In reality, embedded finance could mean there’s an ample opportunity for financial institutions that are ready to leverage it. So, before you make any big moves, we have what you need to know about embedded finance and banks. 

Embedded Finance Is on the Rise

Embedded finance is indeed no surprise for those who have stayed on top of Fintech (financial technology) trends for many years. In addition, non-banking companies have routinely been encouraged by investors and industry leaders to adopt financial services to monetize their customer base further and improve loyalty.

One growing example is implementing “buy now, pay later” (BNPL) financing, which is now available at various clothing, beauty, and home goods retailers. However, this is far from the extent of embedded financing’s future. Currently, insurance providers, car manufacturers, software companies, and organizations in almost every industry realize the opportunities Fintech creates. 

This trend is great news as it represents the chance for non-banking companies to expand their offerings, create a more connected customer experience, and even increase their existing clientele’s lifetime value (LTV).  However, with that said, it can be challenging for banks to see the silver lining when it comes to a topic like embedded finance. 

Will Embedded Finance Harm Banks?

You’re right if you feel like non-banking businesses are encroaching on financial institutions. However, embedded finance is not an attempt to eliminate banks, but it has led to several companies entering the realm and taking market share from traditional lenders. So while it can be a threat to the future of the banking industry, it represents another opportunity for the banks with the resources to take advantage of it. 

Look at it this way: Most non-banking companies simply don’t have the time to develop their offerings from the ground up. Moreover, especially with ever-evolving data privacy and security laws that make compliance more complicated with each passing day, the average non-banking company doesn’t want to take on all the risks associated with developing its banking services. 

What’s more, it’s not the wisest move even for companies that have the resources to invest in developing their banking services. With several financial institutions entering the Banking-as-a-Service (BaaS) space, it’s becoming easier for non-banking companies to pursue embedded finance—but they’re doing it with the help of banks themselves. 

Exploring Banking-as-a-Service

Financial institutions that feel threatened by the rise of embedded finance need only consider the risks that non-banking companies take on when they attempt to develop their services from scratch. It is costly and time-consuming, but it also requires a non-banking company to assemble a brand new team of industry experts to create a system that likely already exists elsewhere. So, instead of standing on the sidelines to try and “protect” your bank from this trend, it’s time to leverage it. Banks, credit unions, and lenders that see embedded financing opportunities will benefit significantly from this trend’s increasing popularity. Plus, if you already have proprietary software in place, you could leverage this opportunity with very little investment.

Banking-as-a-Service allows you to offer your white label software and solutions. With the rise in other consumer-facing financial services (especially retail), you can expect to see more white label solutions soon. In other words, if a retailer is interested in adding a financing option for their customers, they can turn to you for the solution. They need to integrate it into their systems and put their logo on it, allowing them to create a convenient and branded customer experience. 

Meanwhile, your bank can further monetize the software and services you were likely already offering. With some fundamental changes to simplify implementation for your future BaaS clients, you could create a recurring revenue stream with very little additional overhead. That, in and of itself, is why banks should be excited about embedded financing and its future for Fintech.

Is It Time To Enter the Fintech Space?

Especially for smaller and regional financial institutions, it’s easy to feel like Fintech is out of your wheelhouse. However, suppose you can muster up the resources to pull even a simple BaaS offering together. Then, it could be just the opportunity you need to expand beyond your local area and gain lifelong software customers. Ultimately, only you can decide if your business is ready to enter the Fintech space, and it’s important to remember that BaaS is just one opportunity to do so. If you’re interested, it might be a good time to keep your eyes on the coming trends, such as the demand for greater transparency, new technology, and more integrated customer experiences. On the other hand, if you decide to leap, it could be a turning point for your business. 

At the National Merchants Association, we are committed to tech, innovation, and education initiatives to help all of our merchants and partners understand how they can leverage the latest in Fintech. One of the primary advantages of partnering with a merchant services provider like NMA is the invaluable help with understanding and meeting regulations. Need an example? The National Merchants Association has a variety of services that clients already put their names and logos on to make their own, like payday lending and loyalty card processing. Connect with our experts today to learn more about how we can level up your business and take your income to the next level.


National Merchants Association is a merchant advocacy group dedicated to reducing the unnecessary fees associated with accepting credit card payments. Since 2004, they have delivered tailored payment processing solutions and best-in-class merchant service and support for all levels of risk. Whether it’s high-risk or low-risk, brick-and-mortar or e-commerce, National Merchants Association will create the best processing experience for your business. For more information, visit or call (866) 509-7199.