Embedded finance is rapidly changing the way consumers and businesses alike interact with financial services. As traditional banking processes are replaced by more integrated financial solutions, companies across industries are embedding payment processing, lending, insurance, and investment services directly into their platforms.
Throughout April, The Fintech Times has dived into the world of embedded finance, the integration of financial services directly into non-financial platforms or applications, to find out how it is impacting the financial industry and to understand how it can evolve over the coming years.
The rise of neobanks, or digital banks, has been unmistakable in the last decade, and many have become household names in their respective world regions. However, despite their innovative and agile approach, traditional banks have largely maintained the majority of the market share, albeit sharing a portion with these emerging neobanks.
But as embedded finance becomes increasingly mainstream, and with neobanks seemingly in a strong position to capitalise on the trend, could embedded finance be what helps neobanks finally surpass traditional banks?
“Absolutely,” says Luke Voiles, CEO of Pipe, a fintech company enabling embedded financial solutions for software platforms. “Embedded finance equips neobanks with powerful tools to enhance user experience and financial accessibility, differentiating them significantly from traditional banks.
“NPS satisfaction scores for traditional banks have been in the 20s and 30s. We’ve seen embedded capital hit the 70s, 80s, and even 90s. LTV and retention hinge on that customer experience. As customers come to expect that friendlier experience, it’s going to be a race to see who can implement it the fastest, and neobanks are likely to have an edge in agility.”
To further explore this question, we reached out to other industry leaders to see if they agree.
More ground for traditional banks to make up
Nick Botha, global payments lead at AutoRek, a company focused on reconciliation and financial control automation for financial services, also believes that neobanks could surpass their incumbent counterparts by correctly leveraging embedded finance.
“Embedded finance could give neobanks a competitive advantage over traditional banks. As embedded finance grows, traditional banks will likely continue to offer their core current services, however, with a lessening physical presence as most of their business is directed online.
“Neobanks, on the other hand, are built with innovation and agility. With an established digital presence and the upper hand of a seamless, consolidated platform with the use of embedded finance, this is about to increase even more, leaving traditional banks fighting to catch up.
“With embedded finance, neobanks can integrate services into non-financial platforms, tap into new markets and build interconnected ecosystems – positioning them to not only compete, but surpass traditional banks in reach.”
Enhancing flexibility
“Embedded finance gives neobanks a distinct advantage by letting them build seamless experiences where users can pay, invest, or settle funds without ever leaving the app,” adds Meryem Habibi, CRO at Bitpace, the global crypto payment gateway enabling retailers and other businesses to receive payments via digital currencies.
“Crypto wallets are increasingly being embedded within platforms, enabling real-time digital asset payments and cross-border settlements in a few clicks.
“Unlike traditional banks tied to legacy infrastructure, neobanks can quickly adopt decentralised rails and blockchain-powered tools. This includes AI-driven automation for support and transaction flows that reduce friction for users and merchants alike.
“The most forward-thinking finance businesses are moving beyond basic functionality to offer full-stack financial services, including crypto settlements alongside traditional fiat rails. Success will depend on combining this flexibility with robust security, compliance, and technical reliability.”
Streamlining the customer journey
Steve Round, co-founder and president of core banking platform SaaScada, also believes that embedded finance can help position neobanks ahead of traditional banks.
“Neobanks are already built around digital-first experiences, making them well-positioned to capitalise on the rise of embedded finance. With more than 60 per cent of all embedded transactions now stemming from consumer payments, embedded finance has streamlined the customer journey, allowing customers to speed through checkouts wherever they are. Beyond convenience, embedded finance drives innovation and deepens customer engagement. By working finance into the customer journey, neobanks can collect even more data, so they can better understand customer needs and deliver more personalised products.
“However, embedding banking services into the customer journey isn’t always straightforward. There are two paths that organisations can follow. The first option is classic embedded finance, which involves outsourcing the regulation, infrastructure, and development of the service. While quicker to implement, it forces organisations to fit into a specific mould, stifling differentiation and the launch of new features. Not only that, the model is costly and unsustainable at scale, with many organisations eventually outgrowing it.
“Alternatively, neobanks can adopt embedded fintech models to develop and launch new financial products in weeks rather than years. This approach does require becoming regulated and introducing robust structures for tracking and auditing the services on offer – but it offers much more flexibility. Organisations can create their own financial ecosystem that integrates seamlessly with existing services, helping them unlock new revenue streams, increase customer loyalty, and accelerate growth. In doing so, neobanks are in a strong position to compete with, and potentially outperform, traditional banks.”
Outmanoeuvring traditional banks
Alex Misfud, co-founder and CEO of London-based embedded finance firm Weavr, concluded: “Embedded finance is a new channel for delivering financial services, just like the web or mobile were new delivery channels in their time.
“Traditional banks tend to be late adopters of these technologies, and, to that extent, embedded finance is a promising competitive strategy for neobanks. In effect, embedded finance can give neobanks a powerful tool for outmanoeuvring traditional banks by enabling neobanks to get closer to customer needs.
“Neobanks that integrate financial services into context-rich platforms – such as payroll, procurement, or benefits – can create more valuable, stickier ecosystems. While traditional banks still dominate when it comes to balance sheets, neobanks that form smart partnerships around embedded infrastructure can outpace them in user experience, relevance, and speed.
“The true opportunity isn’t simply digitising banking but rather making finance invisible at the point where it creates the most value – and that’s where embedded finance shines.”
