Integrating financial services into your digital offerings can open up a range of possibilities for your business. Whether it's adding payment functionality to a retail application or providing detailed financial analysis within a B2B interface, the benefits – including greater engagement, additional revenue streams, and an environment that supports customer and enterprise use cases – extend far beyond convenience. In 2025, embedded finance generated roughly US$148 billion in global revenue and is currently growing at over 30% annually, illustrating the strong pull of these benefits.

Weaving financial functions into a software application in a way that yields maximum benefits while minimising risks and liabilities requires a mix of strategy and precision. You'll need to consider factors such as compliance and data security, and design a customer experience that remains intuitive despite the increasing complexity that new financial features bring.

What's in this article?

• What is embedded finance?
  
• Types of embedded finance
  
• How does embedded finance work?
  
• Benefits of embedding financial services
  
• 7 steps to embed financial services
  
• How Stripe Financial Connections can help
  

What is embedded finance?

Embedded finance is the integration of financial services within non-financial platforms or applications. It enables businesses that aren't otherwise involved in the financial sector to offer services such as payments, lending, and insurance within their own digital interfaces. A provider's application programming interfaces (APIs) and software development kits (SDKs) let a business embed a financial function directly into its own product. That way, customers can complete payments, apply for financing, or manage a wallet without leaving the app.

Implementing embedded finance features typically requires a partnership between these entities:

• Sponsor banks: Licensed financial institutions that hold deposits, move funds, and issue credit. Because they hold formal banking charters, sponsor banks carry the ultimate regulatory and compliance liability for the financial products.

• End brands and platforms: The customer-facing businesses, such as software-as-a-service (SaaS) companies and marketplaces, that embed these financial products into their user interfaces. They own the customer relationship and use financial services to access new revenue streams.

• Banking-as-a-service (BaaS) providers: The technology layer that connects the sponsor bank to the end brand. Infrastructure platforms build the APIs, abstract the complexity of legacy banking systems, and manage day-to-day compliance workflows, risk screening, and onboarding.

The embedded finance model facilitates direct access to financial functionalities, broadening the scope and reach of financial services. It also enables new business models and revenue streams for businesses that incorporate these services into their platforms.

Types of embedded finance

There are several types of embedded financial services, each offering different features within non-financial platforms or applications.

• Payment processing: Enables immediate transactions without redirecting customers to third-party services. Businesses can incorporate payment gateways or point of sale (POS) systems into their digital interfaces.

• Lending services: Facilitates instant loans or credit extensions. For example, e-commerce platforms might offer buy now pay later (BNPL) options during the checkout process.

• Insurance offerings: Permits businesses to offer customised insurance packages to customers. These might include travel insurance within a booking app for flights or product insurance within an e-commerce portal.

• Investment services: Allows customers to invest in stocks, bonds, or other financial instruments. A content platform geared towards financial news might offer the ability to invest in relevant stocks within the app.

• Personal finance management: Incorporates budgeting and expense-tracking features. Businesses can integrate them into a variety of platforms, such as utilities management applications.

• Digital wallets: Provides a storage mechanism for digital currency, making it easier for customers to manage their money within a single app or platform.

• Peer-to-peer transfers: Enables direct money transfers between customers. This feature is common in social networking or messenger apps and makes sending money as straightforward as sending a message.

• Foreign exchange services: Offers real-time currency conversion and allows customers to hold multiple currencies. These services are beneficial for platforms with global customer bases.

• BaaS: Extends traditional banking functionalities, such as account creation and management, to other platforms. Apps that aim to be all-in-one solutions for customers' financial needs often use this model. This differs from open banking, which focuses on securely sharing a user's existing financial data rather than embedding new transactional products.

• Regulatory compliance services: Assists businesses in adhering to legal requirements related to financial services, such as Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.

• Billing and subscription management: Automates recurring payments for subscription-based services, making it easier for businesses to manage revenue and for customers to maintain their subscriptions.

Each type of embedded finance serves specific needs and businesses can customise those functions to fit their own objectives – by using them independently or combining them for a more holistic financial service offering.

How does embedded finance work?

Embedded finance uses APIs and SDKs, which serve as conduits between a financial service provider and the business that wants to incorporate its services. They function as building blocks that developers use to integrate a specific financial function into their platform. Because APIs and SDKs are modular, the business can choose which financial services (e.g., payment processing, lending, insurance) to include.

Here are the key operational elements of embedded finance:

• API integration: A business integrates an API from a provider like Stripe. That API connects the business's platform directly to the financial service, removing the need for a separate intermediary system.

• Data exchange: Once they're integrated, these APIs facilitate the transfer of information between the financial institution and the non-financial platform. For example, if a customer enters their payment data on an e-commerce site, that information will be transmitted to a payment processor via an API to confirm and complete the transaction.

• User experience: Customers interact with the financial service through the host platform's interface. For example, when a customer on an e-commerce platform chooses to pay with a digital wallet, the site prompts them to authorise the payment within that same interface – without rerouting them to an external site.

• Service customisation: Businesses can personalise the financial services to match their specific requirements or those of their customer bases. Whether this means selecting specific lending criteria or customising the type of insurance the business offers, the goal is to provide a financial solution that matches the platform's broader offerings.

• Revenue models: Businesses can monetise these embedded services through different models, such as transaction fees and revenue-sharing agreements with the financial service providers.

• Regulatory adherence: Typically, the financial service provider manages compliance with financial regulations, allowing the host platform to focus on its core functionalities.

• Real-time operations: Most embedded finance functionalities work in real time. This offers customers the ability to receive instant loan approval or immediate payment confirmation, for example.

• Scalability: Because these services are built with modular APIs and SDKs, businesses can scale them up or down as needed, easily adding or removing services as the platform grows or as customer needs change.

Embedded finance offers a more integrated and interactive experience for the customer while opening up business opportunities for traditional financial institutions and businesses in other sectors.

Benefits of embedding financial services

Embedding financial services into your platform offers a range of advantages. Here's what you could gain from embedding financial services:

• Keep customers on your platform longer: Providing financial services within your platform can keep customers engaged longer by minimising their need to toggle between multiple apps or websites. A frictionless checkout flow can help reduce cart abandonment by up to 35%.

• Use transaction data for sharper targeting: The data that businesses gather from these financial transactions can be valuable for analytics, which can help develop more targeted marketing campaigns and personalise services to consumer preferences more effectively.

• Make your platform a one-stop shop: Integrating financial services means your platform can become a one-stop shop for many different needs. Over time, this convenience can lead to increased customer satisfaction and more loyal users.

• Earn recurring revenue from every transaction: Offering financial services such as lending, investment advice, and payment processing often means charging transaction fees or commissions, which can contribute to your profit. These services also offer opportunities for subscription models that can drive stable, recurring revenue.

• Minimise the manual work in financial reporting: Handling transactions within your platform can make accounting and financial reporting more straightforward by reducing the administrative burden associated with managing financial operations.

• Reach a wide range of customers: Financial services appeal to a wide range of demographics and can help attract new customer segments. For instance, a retail shopping platform could also draw customers who are interested in personal finance or investments.

• Reduce costs by simplifying administrative work: Although there's an initial investment for setting up embedded financial services, their long-term operation can be cost-effective because automating financial services can reduce the time and money a business spends on administrative tasks.

• Stand out among competitors with new product features: Many platforms offer similar core services, so adding financial elements can help yours stand out, giving you an edge in saturated markets.

• Automate and simplify complex financial tasks: For businesses that want to manage pooled funds or handle complex financial operations, embedded financial services can simplify the process by offering solutions to automate these tasks

Integrating financial services can allow businesses to elevate their offerings to a level that was once only possible for large financial institutions. The investment in these services often yields returns that far outweigh the costs, both in financial gains and customer loyalty.

Seven steps to embed financial services

From initial research to ongoing management, embedding financial services into your platform requires considerable effort. That said, providers like Stripe can make implementation simpler. Here's a step-by-step guide to embedding financial services:

Define your goals

Before you dive into the technical aspects, it's important to have a clear vision of what you're hoping to achieve. Do you want to offer your customers a more complete experience? Are you seeking another revenue stream? Answering these questions will help narrow down the types of financial services that are most relevant to your goals.

Research and select a provider

If you decide to buy or partner with a provider, instead of building your own embedded finance platform, choosing the right partner is key. Research potential providers that offer the services you want to integrate. Examine factors such as reliability, reputation, and the range of services offered. Learn more about how Stripe powers embedded finance for platforms and marketplaces.

Confirm your compliance obligations

Although the financial service provider will manage legal compliance, you should still have a clear understanding of your legal obligations. Consult legal professionals to review partnership agreements, customer terms, and data protection protocols. Platforms like Stripe already comply with key regulations such as AML and the Payment Card Industry Data Security Standard (PCI DSS).

Integrate the APIs or SDKs

The technical implementation of financial services usually involves APIs or SDKs. Here's how you might proceed for different types of services:

• Payment processing: Integrate payment gateway APIs to handle transactions within your platform

• Lending services: Use APIs to assess customer eligibility for loans and facilitate the disbursement and repayment processes

• Insurance offerings: Embed insurance selection and claim-filing capabilities through third-party APIs

• Investment services: Use APIs to pull real-time financial data, enabling customers to make informed investment decisions without leaving your platform

• Personal finance management: Implement budgeting and expense tracking features through a combination of APIs and in-house software development

Design the user experience

Work closely with designers to ensure your user interface is intuitive, and ensure financial features are easily accessible and don't disrupt the overall user experience.

Test, launch, and monitor

Conduct rigorous testing to find any bugs, security vulnerabilities, or user experience issues. Once you've tested everything thoroughly, deploy and promote the new features to customers. After launch, continue to monitor performance, customer engagement, and financial metrics. Collect feedback for improvements.

Scale as you grow

The modular nature of APIs and SDKs allows you to scale or adjust services easily. Solutions from Stripe are specifically built to grow and shift with businesses. Regardless, it's important to adjust your strategies regarding embedded finance periodically, even if the tools themselves are already scaling with your business.

How Stripe Financial Connections can help

Stripe Financial Connections is a set of APIs that allows you to securely connect to your customers' bank accounts and retrieve their financial data, enabling you to build innovative financial products and services.

Financial Connections can help you:

• Simplify onboarding: Offer a seamless, instant bank account verification process that does not require manual identity and account verification.

• Access rich financial data: Retrieve comprehensive information about your customers' bank accounts, including balances, transactions and account details.

• Automate recurring payments: Enable your customers to securely link their bank accounts for recurring payments, improving payment success rates.

• Enhance risk management: Analyse customers' financial data to make more informed decisions about credit, lending and other financial products.

• Comply with regulations: Financial Connections helps you meet KYC and AML requirements.

• Innovate with confidence: Build new financial products and services on top of the secure, reliable Financial Connections infrastructure.

Learn more about Financial Connections or get started today.