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The global state of embedded finance

Opportunities for the North American payments industry

Embedded finance is one of the most popular topics in financial services and Fintech at present, and is also a field with significant potential, particularly for payments. Covering the incorporation of financial services into other offerings, embedded finance streamlines the use of financial products and services for consumer and B2B customers, making them a smooth part of a wider process, rather than an additional point of friction.

One widely used example is paying for an Uber – a process that happens automatically at the end of a ride. Others include buy now pay later services that provide lending products during the checkout process, such as those offered by Afterpay and Klarna, and embedded banking services to enable operators of one-person businesses to manage their finances without using their personal account, such as those offered to Shopify merchants.

Across payments, lending, banking and beyond, embedded finance is designed to be relatively invisible to its users, increasing simplicity and accessibility while providing initial revenue streams for the companies offering it. However, while its outward appearance is one of simplicity and ease, under the hood is a stack of solutions that are vital to making embedded finance work, and these vary significantly depending on the region, industry and application required.

This is a significant challenge for companies, but it is also a key opportunity, and the prevalence of embedded finance is expected to expand significantly over the next few years. In late 2019, Andreessen Horowitz general partner Angela Strange gave a presentation in which she claimed that “every company will be a Fintech company” – essentially that embedded finance will become a revenue stream for nearly every organization. The phrase has become near-ubiquitous since because it captures the opportunity that embedded finance offers – if Fintechs and other financial institutions can develop effective solutions for companies to integrate.

In this report, we explore the potential extent of this opportunity, the challenges ahead and what companies in different regions can expect – with a particular focus on payments in North America.