Embedded finance

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Page written by Chris Godfrey. Last reviewed on November 27, 2025. Next review due April 6, 2026.

If you’ve ever bought anything online, you’ve met embedded finance. It’s the digital tool that makes buying, selling, borrowing, lending and investing via the internet so much easier for millions of businesses and customers. Used across a wide range of platforms, embedded finance can deliver greater convenience, more credit choices, increased brand loyalty and real-time visibility of cashflow and more.

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What is embedded finance?

Embedded finance entails the seamless integration of banking and financial services – such as payments, lending, insurance or deposit accounts – into non-financial platforms or apps. In other words, businesses that operate outside the traditional financial sector, such as online fashion retailers, can incorporate financial offerings directly into their platform, rather than redirecting their customers to standalone banks. Typically, this integration makes it easier and faster for the customer to buy the company’s products or services.

How does embedded finance work?

Embedded finance works when non-financial platforms partner with licensed financial institutions or fintech providers via APIs and Banking-as-a-Service (BaaS) infrastructure. For example, at checkout in an ecommerce app a customer may be offered a “buy now, pay later” credit option without having to leave the platform. These services are delivered behind the scenes by financial providers, while the consumer remains within the non-financial platform’s environment.

What is an API?

API stands for Application Programming Interface. Think of it as a common language that lets different software systems communicate smoothly with each other, without needing to know how the other operates.

What are the benefits of embedded finance?

Embedded finance offers businesses a way to deepen customer engagement, open new revenue streams and improve convenience. It also allows platforms to tailor financial services according to usage data, reduce friction in the customer’s journey and strengthen brand loyalty.

Pros

Offers seamless customer experiences by delivering financial services at the point of sale
Creates additional revenue opportunities for non-financial platforms through fees, interest or service premiums
Helps build customer loyalty by embedding valued financial tools inside a brand’s ecosystem, reducing the need to go elsewhere

Cons

Can raise regulatory and compliance risks because non-financial companies must still ensure appropriate licensing, data privacy and anti-money-laundering controls
Introduces operational and third-party complexity: Multiple back-end providers, APIs and vendors may increase fragility and risk of failures
May expose businesses to reputational risk if customers misunderstand which entity is providing the financial product, or if data breaches occur

Who can benefit from embedded finance?

Embedded finance can benefit many types of business:

SaaS platforms

SaaS platforms can benefit from embedded finance by adding greater value to their software offering. By integrating payments, invoicing, lending or expense management, these platforms can enhance the user journey and reduce the need for external tools. This not only improves customer retention and engagement it also creates the opportunity to gain new and recurring revenue streams through transaction fees, interest margins or premium financial services.

B2B marketplaces

B2B marketplaces benefit from embedded finance by streamlining how buyers and sellers transact within the platform. Features such as embedded payments, instant payouts, trade credit or invoice financing can reduce friction, improve cashflow and speed deal completion. This creates a more efficient ecosystem, increases transaction volumes and strengthens platform loyalty, as users are more likely to stay within a marketplace that simplifies both commerce and finance.

Enterprise and mid-market firms

Enterprise and mid-market firms use embedded finance to modernise internal processes and improve operational efficiency. By integrating financial services directly into their procurement, payroll or supply chain systems, they can automate payments, optimise working capital and gain greater visibility over cashflow.

SMEs and high-growth startups

Embedded finance can help SMEs and high-growth startups by delivering easier access to capital and simplified financial management. Integrated tools such as instant lending, embedded payments and automated reconciliation can reduce the administrative burden and improve cashflow visibility. This allows founders to spend less time on manual finance tasks and more time scaling their business. For fast-growing companies, embedded finance can provide flexible, real-time funding aligned to performance.

What are the different types of embedded finance?

Popular types of embedded finance include:

Embedded payments

Embedded payments routinely allow customers to complete transactions directly within a platform, app or website without being redirected to external providers. This can include making card payments, using digital wallets, making bank transfers and more. A smoother checkout experience, fast settlement offering and fewer abandoned transactions can help businesses improve their conversion rates and cashflow predictability.

Key benefits at a glance:

Create faster, smoother checkout experiences that help increase conversion rates
Improve cashflow through quicker settlement times and reduced payment delays
Reduce operational complexity by centralising payment processes within one platform

Embedded lending

Embedded lending integrates credit options directly into a platform, offering users access to finance at the point of need. This might include “buy now, pay later” options, working capital loans or invoice financing. By using real-time platform data, lenders can make faster, more accurate credit decisions and deliver funding with minimal friction.

Key benefits at a glance:

Provide instant access to credit at the point of need, improving customer satisfaction
Unlock new revenue streams through interest and financing fees
Use real-time data to enable faster, more accurate credit decisions

Embedded insurance

Embedded insurance makes it possible to offer tailored insurance products at the moment they’re most relevant, such as when a customer is purchasing an expensive product, renting equipment or booking a service such as a vacation. Coverage is built directly into the customer journey, simplifying the buying process and improving uptake by removing the need for separate applications or comparisons.

Key benefits at a glance:

Increase product uptake by offering relevant cover at the right moment in the customer journey
Enhance customer trust through convenient, easy-to-understand protection options
Generate additional income via commissions and revenue-sharing models

Banking-as-a-Service (BaaS)

Banking-as-a-Service enables non-financial businesses to offer regulated banking features, such as accounts, cards and money management tools, through licensed banking partners. Using APIs, companies can embed financial infrastructure into their own platforms, allowing them to launch branded financial services without becoming a fully licensed bank.

Key benefits at a glance:

Accelerate time to market by leveraging licensed banking infrastructure
Enable branded financial products without the need to become a regulated bank
Support scalable growth through flexible, API-driven financial services

How to integrate embedded finance into your business

Integrating embedded finance into your business starts by identifying where financial services could remove friction or add value to your customers’ journey. This might include offering embedded payments at checkout, flexible credit options or insurance products. The next step is partnering with a licensed bank or Banking-as-a-Service provider that can supply the necessary infrastructure and regulatory coverage.

Businesses should also consider data security, compliance obligations and user experience design to ensure the finance services feel seamless, intuitive and trustworthy, while still supporting long-term scalability as demand grows.

Alternative digital finance solutions for businesses

Embedded finance is not the only digital financial solution available to businesses:

Open banking tools

Open banking tools allow businesses to securely access and share customer banking data through regulated APIs and with the customer’s consent. These tools can power services such as account-to-account payments, real-time balance checks and automated affordability assessments. For businesses, this means faster onboarding, improved cashflow visibility and more accurate financial decision-making. By reducing reliance on traditional card networks, open banking can also lower transaction costs and improve payment success rates, while giving customers a smoother, more transparent experience.

Key benefits at a glance:

Enable faster, more secure access to real-time financial data with customer consent
Reduce payment costs by supporting direct bank-to-bank transactions
Improve decision-making through accurate, up-to-date account insights

Digital wallets and payment gateways

Digital wallets and payment gateways enable businesses to accept, store and process payments quickly and securely across multiple channels. These solutions support cards, bank transfers and alternative payment methods, allowing customers to pay within apps, websites or point-of-sale systems. For businesses, this improves checkout speed, reduces friction and helps increase conversion rates. Integrated reporting and fraud protection tools also provide better visibility and control over transactions, supporting more efficient reconciliation and stronger risk management.

Key benefits at glance:

Speed up checkout and improve customer experience across channels
Increase conversion rates by reducing payment friction and abandonment
Provide built-in security and fraud prevention to protect transactions

Credit and risk scoring technologies

Credit and risk scoring technologies use data analytics, machine learning and alternative data sources to assess the financial health of customers or businesses in real time. Rather than relying solely on traditional credit histories, these tools can analyse cashflow, transaction patterns and behavioural data. This enables lenders and platforms to make faster, more accurate lending decisions, reduce default risk and widen access to finance, particularly for SMEs and new businesses that have limited credit histories.

Key benefits at a glance:

Deliver faster, data-driven credit decisions with improved accuracy
Reduce default risk through better visibility of borrower behaviour
Expand access to finance for SMEs and thin-file or new-to-credit customers

Alternative funding options to embedded finance

If embedded finance is not for you, there may be other ways to gain the funds your business needs.

Traditional debt financing

Traditional debt financing means borrowing money from a bank or similar financial institution. Common forms of debt financing include:

Term loans
Term loans are the simplest form of business loan. Borrowers receive a single, lump-sum cash injection of up to £5 million and then pay it back in regular or flexible instalments, plus interest and any fees, over a period of anywhere from 1 to 25 years. Security may be required.

Business line of credit
Also known as a revolving credit facility, a business line of credit functions like a high-value credit card. Businesses can withdraw as much as they want when they want from a loan facility up to the agreed limit of their borrowing. Once borrowed funds are paid back, they can usually be borrowed again. Interest rates are typically fixed, and businesses may repay on a set or ad-hoc schedule. Security may be required.

Equity financing

Equity financing is the process of raising capital by selling ownership shares in a business to investors. Instead of repaying a loan, the company provides equity holders with partial ownership and potential profits through dividends or capital gains. This form of financing can help businesses fund growth, innovation, or expansion without incurring debt, though it may dilute control among existing owners or founders.

Asset-based lending

Asset-based lending is a type of loan secured by a company’s physical assets, such as inventory, property, or plant and equipment. Lenders use these assets as collateral, which reduces risk and may allow businesses to access funds even when they have weak credit. Asset-based lending is typically used for working capital or cash flow support. No added security required.

Revenue-based and alternative finance models

Revenue-based financing provides capital to businesses in exchange for a fixed percentage of future revenues. Repayments adjust with income, offering flexibility without giving up equity or ownership. Typical funding models include:

Invoice financing
Invoice financing (also known as invoice discounting) allows businesses to borrow against the value of their outstanding invoices. Instead of waiting 30, 60, 90 days or more, release the cash tied up in your unpaid invoices as soon as you issue them – sometimes in 24 hours or less. You retain control of your sales ledger and are still responsible for collecting payment from your customers. This means clients need never know you’re using their invoices to raise funds. No added security required.
Merchant cash advances
Available for businesses that accept customer payments by credit and debit card. A merchant cash advance allows you to borrow against the value of your card sales. As card sales increase, so your borrowing limit goes up. The loan is paid back via a fixed percentage of card sales on a daily, weekly or monthly basis. The sales act as security for the loan. No added collateral required.

Alternative financing models include:

Crowdfunding
Available via various online platforms, crowdfunding can provide the cash you need if your presentation hits the right spot. Although it may be tough to raise large sums in small donations from hundreds of donors, the cash is essentially free as there is no interest to pay, and you don’t need to repay the money if you spend it where you said you would. An eye-catching idea and a powerful pitch are essential to succeed with this funding option. Security is not required.
Peer-to-peer (P2P) lending is a method of borrowing money directly from individual investors through an online platform, bypassing traditional lenders such as banks. Businesses apply for loans, and lenders may choose to fund them, often in small amounts across multiple loans. Although this lending method can be time-consuming for borrowers, it may offer access to funds when businesses are unable to obtain other types of business loan. Security may be required.

Get started with Swoop’s business funding platform

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Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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