Embedded finance, despite early promises, has not been adopted at quite the scale expected of a growing multi-billion market. The shift from early fintech-to-fintech implementations to consumer-facing products opened up a huge market, yet implementations
are not as prevalent as they could be and most deployments have been relatively small in scale, with Buy Now, Pay Later (BNPL) as the exception.
Additionally, much of the early embedded finance activity was fintech-to-fintech. This meant that the buyer did not have the ability to scale its implementation. However, 2025 is the year things are set to change, with big brands adopting embedded finance
at scale. What is triggering this shift by brands? The answer lies in putting the ‘B’ back in BaaS.
Putting the ‘B’ back into BaaS
Traditionally, embedded finance has been led by fintechs, who may not have a banking license. They may have worked with a partner bank or simply provided the technology to make embedded finance possible. This was effective early on when innovation and speed
to market were the priority. However, the regulatory and governance challenges that have faced Banking-as-a-service (BaaS) providers on both sides of the Atlantic have made this approach unsustainable, especially in the minds of big brands.
The problem lies in the lack of a track record from most fintechs in dealing with governance and compliance. Many brands have had to rely on banking licenses from partners who themselves have compliance gaps and deal with a number of operational and customer
support issues. Historically, many brands have faced a compromise – work with a tech business that can power innovation but may not be the right fit for regulatory and operational requirements, or work with a big bank with those frameworks, but without the
technical excellence. This left brands with an unwelcome choice: whether to favour technical excellence over necessary credentials.
Thankfully, with big banks investing in technologies needed to make embedded finance work, brands no longer have to make that choice — they can access cutting-edge technology and a matching compliance profile. By putting the banks back into BaaS, the foundation
for embedded finance to scale is in place.
Trust as a catalyst for scaling embedded finance
Brands need embedded finance partners with the right level of customer, technical, operational and regulatory excellence. After all, as a brand, the purpose of deploying embedded finance is to boost customer engagement and revenues. If customer support fails,
systems face outages, or regulators intervene, then a loss of customer trust, and a subsequent dip in revenues, will follow. Brand reputations could also be damaged. Confidence in the broader market could fall, and embedded finance — created to increase engagement
and customer satisfaction — could run the risk of doing precisely the opposite of what it aims to do.
For embedded finance to work, consumers must trust both the brand and the financial institution behind it. The challenge of building trust creates an opportunity for big brands and banks to scale embedded finance, and the
evidence shows trust is necessary for business growth.
Big brands + big banks = scale
The advantage fintechs have in the implementation of embedded finance is speed, with deals typically finalised and executed much faster than those involving major banks. Large-scale agreements often take longer to finalise because they are long-term in nature;
sometimes longer than even some fintechs have been around. If embedded finance is to be truly offered at scale, it needs the collaboration of the big brands and big banks, which have a better chance at longevity.
Big brands control distribution channels and big banks have access to funding and the balance sheet to back them up – these things matter. Boston Consulting Group (BCG) predicts that 50% of global banking revenue will be earned by non-banks, up from 28%
in 2022 by 2030. This prediction is only viable if embedded finance is available to large brands with millions of customers.
Big banks had a slow start to embedded finance involved thanks to legacy technology. But this is changing. Banks now offer technological excellence in addition to customer, operational and regulatory capabilities, and the balance sheet to scale services
to millions of customers. Banks are also household names and enjoy a level of consumer and brand trust. That trust makes it easier for big brands to get on board. And with big brands, we have scale.
An inflection point: embedding scale into the BaaS market
Embedded finance has come a long way — it’s a proven technology with consumer demand, no longer disruptive and experimental. Understandably, major brands are looking to embed financial services in their offerings. Embedded finance is no longer in its infancy;
it needs to scale.
The criteria for delivering embedded finance solutions now go beyond technology. A reliable and easily embedded API, backed up by an excellent tech stack is now expected of any provider. Brands will now want a provider who can match them in credibility,
balance sheet and the ability to support as many customers as they offer. With banks bringing their capabilities to the embedded finance market, 2025 will be the year it finally scales.