What is embedded finance?

In its simplest form, embedded finance can be considered an umbrella term for when a business integrates financial services directly into its ecosystem. It is the process of contextualized integration of financial solutions into a non-financial product or service. Crucially, these businesses do not become regulated financial institutions themselves.

The concept of embedded finance is nothing new. For years, institutions have offered financial services such as private-label credit cards at retail chains, supermarkets or airlines, while car dealerships presented auto loans. For banks, services such as these allow them to reach new customers en-masse through a variety of new partner channels.

The ubiquity of today’s digital services has acted as a catalyst for embedded finance, and the number of non-financial companies that can now offer financial products and services has grown. eCommerce merchants can offer services such as lending, while car dealerships can offer insurance instantaneously for new customers. Many consumers will already be using embedded finance, like making payments in Uber, even if they are not aware of the term. From the consumer’s point of view, embedded finance is also known as invisible finance because the integration of financial services is so natural that the underlying financial transactions are invisible, offering seamless experiences. As more businesses continue to digitise and technology continues to proliferate, embedded finance will only increasingly become part of our day-to-day lives.

While there’s often confusion about how embedded finance differs from Banking-as-a-service (BaaS), it’s important to recognise that they can coexist and don’t compete directly with one another. Also, it is worth introducing as a side note, FaaS (finance-as-a-service) which is the distribution of financial services by non-financial companies using technology-based solutions. The concept of FaaS is broader than the one of embedded finance.

In simple terms, BaaS is trying to win customers away from more traditional banks while embedded finance is seeking to keep customers using their core (non-financial) products or services by offering a more seamless transaction behind the scenes.

BaaS providers require their clients to manage the service provision by themselves. Embedded finance is doing this too, with a built-in offering including compliance and regulatory requirements. The BaaS client is onboarding the end-user, while the embedded finance clients is not (the embedded finance provider takes care of it).

Consumers leveraging an embedded finance service understand that the integrated financial service is being provided by a third party, however, with BaaS, the front-end provider manages the BaaS provider in the background, without making it explicit to the end-user when ordering products or services. So, which products and services will benefit from embedded finance specifically?




Removing friction in the payments process can be a huge challenge for retailers. Many customers have abandoned their online baskets when asked to enter 16-digit card numbers or authenticate payments using biometrics.

Embedded payments can make this process much easier, providing a way to connect and save payment methods for later, many of which are then accessible with just one click. Furthermore, embedded payments give consumers the option to pay the merchant directly from their bank account, also known as account-to-account payments (A2A payments) meaning reduced fees and faster processing for the merchant.

On the B2B side, the embedded payment experience enables any enterprise to trigger payment events within its core business software (ERP, CRM, etc.). To state the obvious, every company makes payments -to suppliers, for example- and can benefit from simple and efficient payments solutions such as those offered by PagoNxt to integrate them into their internal processes.

“Embedded payments can make this process much easier, providing a way to connect and save payment methods for later, many of which are then accessible with just one click”


In the past, customers may have had to apply for loans or a credit card to borrow money to fund a large purchase prior to making it. These often carried high-interest rates, which could take a long time for the customer to repay.

Embedded lending, however, enables companies to offer more favourable loan rates at the checkout, offering customers the chance to decide on their terms of repayment during the purchasing process. Buy Now Pay Later (BNPL) is arguably the most common example of embedded lending and has become increasingly popular around the world over the previous decade. In Latin America, it’s expected BNPL payments will eventually account for 20% of the region’s eCommerce, should it continue its upwards trajectory.




Previously, purchasing insurance for a large purchase (such as a home or car) remained an entirely separate process from the checkout. Now, due to the rise of digital marketplaces, customers can be offered both singular and multiple policies when and where they need it, without the need to engage insurance companies and agencies later.

While the placing of a financial product in a non-financial customer experience, journey, or platform is nothing new, payments, lending and insurance are just a few of the use cases which embedded finance stands to unlock.

By monetizing services through distributors, embedded finance providers are reaching players without heavily investing in the end-user experience, reducing unit-processing costs as a result. In conclusion, to capitalise, brands must forge long and innovative partnerships with enablers such as PagoNxt to offer the true breadth of embedded financial services to their customers.

The opportunities are near limitless — the time to build is now.

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