Embedded Finance: When Non-Financial Brands Become Financial Service Providers

Last Updated on December 1, 2025

Nonfinancial brands now add banking-like tools directly into their apps and stores. This trend blends payments, lending, and insurance right where your customers already shop or engage. It lets your company offer real value at the exact moment someone needs it without building core systems or chasing licenses.

Market momentum is clear. The sector is large and growing fast, with U.S. transactions rising rapidly and global interest climbing. Brands such as Target, Shopify, Uber, Lyft, and Starbucks show how these integrated offerings drive loyalty, fees, and new revenue while keeping the experience seamless.

Key Takeaways

• You’ll learn how adding financial capabilities meets customers in context and boosts conversion.
• Non-financial companies often partner with banks and platforms instead of building everything.
• The market is expanding fast in the U.S., making this a strategic opportunity for your business.
• Embedded solutions create new monetization paths through fees, rewards, and loyalty.
• Operational needs—risk, governance, and compliance—must be part of your plan.
• This guide maps steps from discovery to pilot and scale so you can move from curiosity to execution.

What embedded finance is today—and why it’s different from traditional banking

You no longer need to send shoppers to a separate bank to give them payment, lending, or insurance options. In plain terms: embedded finance lets you put payments, loans, or protection directly into your app, site, or store so customers complete tasks without leaving your flow.

How this changes the experience:

• Offers appear at the right moment—checkout, onboarding, or checkout extras—reducing clicks and drop-off.
• Nonfinancial platforms act as the primary touchpoint while regulated institutions and BaaS provide licensing and rails.
• Examples include BNPL at checkout, in-app wallets, and insurance add-ons that appear when a user buys a high-value item.

“You meet the customer’s need in context, not in another tab.”

That split—your front-end ownership and partner back-end—lets your team focus on UX, relevance, and integration. Lightweight APIs and SDKs make the work manageable, and two-thirds of adults now use digital payments, speeding adoption across mobile and web.

The 2025 landscape: Market size, growth, and why you should care now

Big growth is coming—your app could host trillions in transactions within a few years. In the U.S., transaction volume tied to embedded finance jumped from $2.6 trillion in 2021 and is on track to reach about $7 trillion by 2026. That raises its share of total U.S. transactions from roughly 5% to 10%.

The global picture also matters: payment volume tied to these models is forecast to top EUR 6 trillion soon. The market value climbed to $82.32 billion in 2023, and embedded financial services revenue could hit $291.3 billion by 2033, up from $22.5 billion in 2020.

• Drivers: post-COVID digital acceleration, API maturity, and partnerships.
• Business impact: higher conversion, bigger average orders, and stronger retention.
• Timing: early pilots move to scaled offerings as platforms and banks lower barriers.

Put simply: these trends create real opportunities for companies that add payments, lending, or insurance products into their customer journeys now.

How embedded finance creates value for your business and your customers

Adding in-app wallets, instant approvals, or point-of-sale loans turns moments of doubt into completed sales. These features reduce steps, speed checkout, and keep your user inside the flow. You meet needs where customers already interact with your brand.

Reducing friction and boosting conversion inside your existing journeys

In-flow payments and instant approvals cut drop-off at checkout. McKinsey research shows conversion can rise from about 15% to 50% or more when you remove external steps.

Practical wins:

• Pinpoint funnel drop-off and add a one-click wallet or stored credentials.
• Offer on-the-spot lending or BNPL to lift average order value.
• Use ACH-based options like SmartPay Rewards to lower fees and encourage repeat buys.

Unlocking loyalty with seamless experiences and personalized offers

When rewards, cards, or payouts live in your app, loyalty grows naturally. Personalization uses first-party data to show the right offer at the right time.

Result: happier customers, higher NPS, and more repeat visits.

New revenue streams from fees, cross-sell, and engagement

Nonbank companies can monetize through transaction shares, premium tiers, and adjacent financial products. You’ll balance fee savings and user preference to protect margin without harming convenience.

“Value isn’t only revenue—it’s lower churn and a more memorable experience.”

Frame ROI by combining conversion lifts, fee economics, and lifetime value gains into a clear business case.

Inside the ecosystem: Sponsor banks, BaaS providers, and your role as the end-brand

Your program rests on a three-way partnership: the brand that owns the moment, a sponsor bank that holds licenses and regulatory liability, and a BaaS platform that supplies the technical rails.

Who does what: Licensing, infrastructure, and customer experience

Sponsor banks provide access to payment systems like Fedwire and ACH, plus card networks such as Visa and Mastercard. They also carry regulatory oversight and bear legal responsibility for on‑ramps and KYC.

BaaS providers deliver card issuance, payment processing, deposit accounts, and compliance-as-a-service. They reduce engineering lift with APIs, white-label UIs, and monitoring tools so you move faster.

Embedded finance vs. BaaS: The “what” and the “how”

Embedded finance is the product you place in your app. BaaS is the operating model and rails that make the product work.

Partnership structures you’ll encounter in the US

• Direct brand + bank partnerships for control but higher setup effort.
• Brand → BaaS → bank for speed and turnkey services.
• Bank-led programs where the institution owns most compliance and risk.

Practical next steps: map data flows, clarify contractual accountability, and ask vendors about SLAs, roadmap alignment, and shared KPIs. Look at players like Marqeta, Galileo, or Sila as examples when you map your stack.

“Align roles early so you own the customer while partners manage regulated rails.”

Operational models and risk: From bank-as-a-regulator to compliance-as-a-service

Pick the operating model and you pick the program’s risk profile, compliance burden, and speed to market. Your choice affects who runs controls, who files reports, and how quickly you can launch new services.

KYC/AML obligations and shifting responsibilities

Three common models exist: a bank-as-regulator model where the sponsor bank leads compliance; a program-management model where the bank delegates bulk operations to a BaaS or middleware; and compliance-as-a-service where fintechs tap the bank’s risk stack directly.

Whatever you pick, KYC, AML, sanctions screening, and fraud monitoring are non‑negotiable. These controls must sit in onboarding and ongoing monitoring pipelines.

Governance, oversight, and reporting that keep programs sustainable

Set joint risk committees, cadenced policy reviews, and control testing so your work matches the sponsor bank’s standards. Define reporting beats: transaction summaries, dispute ratios, and fraud trends for auditors and regulators.

• You’ll balance customer friction and protection by tuning identity checks and transaction scoring.
• Contract terms often pass fines or liability down to partners—so build contractual safeguards and insurance where possible.
• Layer defenses: device signals, identity verification, and behavioral scoring to reduce false positives while blocking abuse.

“Design governance and reporting first; products follow faster when risk rules are clear.”

Final note: embed product, engineering, compliance, and operations early. That culture lowers rework, speeds approvals, and keeps your business resilient as regulators increase scrutiny.

Core product types you can embed: Payments, lending, banking, insurance, investing, and marketplaces

You can turn checkout and account pages into full-service financial touchpoints that boost conversion and loyalty. Start by mapping which product fits your users and tech stack. Then sequence launches from simple to complex.

Payments and wallets cut abandonment. Examples like the Starbucks app or ACH-based SmartPay Rewards show how one-click pay and stored credentials lift conversion and lower merchant costs.

Lending and BNPL move higher-value buys across the line. Work with providers such as Klarna, Affirm, or Afterpay and make terms crystal clear at checkout.

Banking and branded cards deepen loyalty. Think Lyft’s in-app checking or Shopify Balance for faster payouts and rewards that keep customers engaged.

Insurance and warranties fit naturally at purchase. Offer single-policy, multi-carrier, or extended warranty options via partners like Boost, Matic, Clyde, or Extend.

Investing and marketplaces add value for specific segments. Micro-investing or crypto via Venmo, PayPal, or Greenlight lets users act without leaving your app. A financial marketplace helps customers compare offers and choose the right plan in one flow.

• Evaluate providers for clean APIs, SLAs, and compliance.
• Define success metrics per product: approval rates, time-to-pay, attach rate.
• Roll out in stages: wallets/BNPL first, then cards, insurance, and marketplaces.

Industry applications: Where embedded finance wins across sectors

Across industries, brands now add payments and banking tools where customers already act—at checkout, at booking, or at pay day. That shift turns intent into action and opens new revenue and loyalty paths for your business.

Retail and ecommerce

Retail leaders use branded cards and one-click wallets to boost conversion and rewards. Examples like Target RedCard and the Starbucks app show higher repeat purchases and larger baskets.

Mobility and gig platforms

Rideshare companies embed faster payouts, cash advances, and tailored debit cards to raise driver satisfaction and retention. Faster access to earnings is a clear loyalty driver.

B2B SaaS and platforms

Platforms such as FreshBooks pair working capital and revenue-based lending with invoices and in-platform cards. This helps your customers manage cash flow and run operations more smoothly.

Learn how transaction models work in practice with a deeper read on defi business transactions.

Telco, hospitality, media, and more

Nonbank sectors add services via partners to expand offerings without taking on licensing. At booking, shipment, or invoice moments you can surface the right option with minimal friction.

“Place offers where intent is high to maximize adoption without cluttering the experience.”

• KPIs: wallet load volume, payout speed, financing approval rates.
• Integration moments: shipment, booking, invoice, payday.
• Test: run cohorts and tune eligibility, attachment points, and rewards.

Business models and revenue: Turning experiences into new revenue streams

Monetizing in-app moments turns helpful features into measurable profit. You can capture value when customers pay, borrow, or use add-on services inside your product. Nonfinancial brands earn more than direct sales: they share interchange, collect fees, and split revenue with partners.

Interchange, transaction fees, and revenue sharing

Cards and wallets create clear money flows. You’ll get interchange shares, a cut of transaction fees, or agreed revenue-splits on lending and insurance.

• Interchange sharing: a steady margin on card spends.
• Transaction fees: per-transaction revenue for payments and payouts.
• Revenue-sharing: partner deals for lending and protection that scale with volume.

Premium services, cross-sell, and lifetime value growth

Premium tiers—instant payouts, higher limits, or analytics—justify subscriptions or one-off charges. Use engagement signals to suggest adjacent products without spamming your customer.

• Pass ACH savings to users as rewards to grow adoption and share of wallet.
• Build cohort forecasts that mix adoption, ARPU, and retention into a clear revenue model.
• Experiment with pricing and bundles, then lock in guardrails to protect trust and the customer experience.

“Align incentives with partners so revenue scales fairly as volume grows.”

From idea to launch: Build, partner, or buy—and how to integrate

Deciding whether to build, partner, or buy shapes speed, cost, and control from day one. Your choice defines time to market, ongoing cost, and who owns customer risk.

Choosing providers: Banks, BaaS platforms, and category specialists

Partner models usually speed delivery. Companies like Unit, Checkout.com, and Engine by MoneyLion offer banking, payments, and marketplace infrastructure to move fast.

Build gives control but costs more and takes longer. Buy is fastest but limits customization. Partner sits between—fast with moderate control.

Data, APIs, and integration

Design a modern data and API architecture that uses Plaid for IDV and transfer APIs to reduce onboarding drop-off and streamline money movement.

Use webhooks, event streams, and retry logic so risk signals and settlements are reliable and observable.

Roadmap: Discovery, compliance readiness, pilot, and scale

1. Discovery and vendor selection tied to business goals.
2. Compliance readiness: KYC/AML alignment with your sponsor bank.
3. Pilot a segment or product to validate UX and economics.
4. Scale with dashboards for approvals, declines, fraud, and settlement health.

For deeper planning on predictive analytics and decisioning, see predictive analytics for finance.

“Define roles across product, engineering, compliance, and ops so launches are predictable.”

Real-world momentum: Examples and providers to know in the United States

Leading brands are already turning common moments into financial experiences that help customers act faster. These rollouts show practical patterns you can copy: clear value at point of need, tight risk controls, and partner-led integration that speeds time to market.

Lyft, Shopify Balance, Starbucks, and Target: experiences customers love

Lyft offers in-app checking and a driver debit card to speed access to earnings and boost retention.

Shopify Balance delivers faster payouts and merchant rewards that keep sellers on the platform.

Starbucks uses a one-click wallet to make purchases effortless. Target RedCard ties payment to a 5% discount, nudging repeat spend.

Uber’s stack: payouts, cards, and loyalty stitched together

Uber orchestrates several partners to deliver a seamless program. Think Uber Cash, flexible payout options, and a debit product that supports loyalty.

Their stack includes sponsor bank GoBank, payment rails via Stripe, card issuance by Branch, and BIN sponsorship from Evolve Bank.

FreshBooks + YouLend: revenue-based financing inside a B2B platform

FreshBooks embeds same-day, revenue-based offers via YouLend so small firms access capital without a separate application.

This example shows how a B2B platform adds lending products to improve cash flow and customer lifetime value.

Providers powering programs: Unit, Checkout.com, Engine by MoneyLion, Walnut

These providers supply core APIs for storing funds, payments, lending, and insurance brokering.

• Unit: account and lending APIs to store, move, and lend funds.
• Checkout.com: global payments, fraud tools, and multi-currency support.
• Engine by MoneyLion: embedded marketplace and analytics for monetization.
• Walnut: embedded insurance brokerage for point-of-sale protection.

“Look for partners with strong US regulatory track records and clean APIs so your integration is predictable.”

Takeaway: start with the most visible win—wallets or payouts—then layer cards, lending, and insurance. Match providers to your roadmap and manage fees, data flows, and customer experience as you scale.

embedded finance trends shaping the next few years

Relationships between brands and banks are shifting as retailers and apps add in‑product financial offerings. You’ll see distribution blur as nonbank companies deliver payments, lending, and insurance where consumers already act.

Rearranged relationships and new types of competition

Large brands will share customers with traditional institutions and new providers. Expect niche neobanks and employee banking models to compete on specialization and personalization.

Result: more partners, more choices, and sharper expectations around product fit and customer experience.

Regulatory pressure, risk discipline, and durable partnerships

Regulators will tighten rules as transactions grow. Sponsor banks stay on the hook, so you must pick partners with strong compliance and controls.

• Clear roles and SLAs
• Transparent reporting and joint risk management
• Continuous monitoring and adaptive controls

Opportunities in underserved segments and niche verticals

Underbanked customers and industry niches are high-opportunity areas. Your first‑party data and distribution let you deliver better-fit services and capture new revenue streams.

“Design multi-year roadmaps that balance growth with risk‑adjusted returns.”

Plan ahead: sequence product launches, align incentives with partners, and measure revenue against durable controls so your program scales responsibly over the coming years.

Conclusion

Recent transaction forecasts and real-world programs show that embedded finance is a repeatable growth lever that lifts conversion and loyalty.

You’ve seen U.S. projections and global volume trends that prove scale. Retail, mobility, and B2B pilots moved to live products in just a few years, shortening time to value.

Practical next steps: pick a build, partner, or buy path that matches your goals and resources. Map the sponsor banks and BaaS providers you’ll need, and bake governance into launch plans.

Prioritize product sequencing—payments, lending, branded accounts, then insurance or marketplaces—so you grow revenue and protect the customer experience. Start small, measure what matters, and expand with confidence.