One of the most important trends that is shaping the banking, fintech, and lending industry is embedded finance. According to a 2025 survey by Treasury Prime, 100% of the 300 participant US small banks’ decision makers were exploring embedded finance as their strategic growth driver. 73% of participant leaders said that their financial institution was already offering or involved in partnership discussions with embedded finance companies.
Another PYMNTS Intelligence report revealed that 30% of Gen-Z are likely to switch their financial institution if they fail to innovate with their emerging demands. New-age borrowers choose lending options at the point of sale, including a line of credit and buy-now-pay-later (BNPL) services. Banks that fail to facilitate embedded financing options will miss out on a lucrative market, poised to grow to $468 billion by 2034.
Embedded finance is now a business imperative for banks, credit unions, and other financial institutions to grow in a competitive SME lending market. The problem for bank leaders is that digitally embedded financial services often bypass or sidestep the traditional banking relationship, leaving legacy finance providers out of the picture. By deploying embedded finance solutions across digital platforms through partnerships with fintech companies, small banks can expand their loan portfolio and offer inclusive services to digital-savvy SMEs.
A Unified Definition of Embedded Finance Companies
In the simplest form, embedded finance companies offer a tech platform that helps banks, credit unions, and other financial institutions integrate their financial products through APIs and platforms. For example, an e-commerce platform partnering with a company such as PayPal or Stripe allows customers to make purchases easier with embedded technology during the checkout process, without leaving their website. Extending this to embedded lending means that PayPal and Stripe can offer loan products and embedded payments with pre-determined credit eligibility, installment options, and interest rates.
Benefits of Embedded Finance Platforms for Banks
By adopting embedded finance, small banks can modernize their offerings, strengthen customer loyalty, and unlock fresh revenue streams, all while keeping pace with rapidly evolving digital expectations. Here are some key benefits these platforms can deliver.
- Integrating financial service providers like payments, tracking, renewals, and alerts with non-financial platforms like retailers, budgeting apps, e-commerce platforms, payment solutions, Customer Relationship Management systems, Enterprise Resource Planning systems, and even specialized point-of-sale (POS) systems.
- Generating new revenue streams from embedded convenience-of-transaction fees through payment processing on third-party applications.
- Growing low-cost deposit acquisition rates through fintech partnerships without inflating the cost of funds.
- Improving customer experience with pre-screened approvals, personalized credit amounts, repayment terms, and interest rates.
- Boosting consent-driven access to bank accounts, financial data, and other metrics to automate loan decisions within the regulatory compliance frameworks.
While the benefits may look lucrative enough to immediately adopt embedded finance, they rely heavily on the embedded finance partnership to ensure the expected output. Building embedded banking and finance products in-house requires substantial time, effort, resources, and budgets. Embedded finance companies, on the other hand, optimize in a way that makes building in-house an unattractive approach to adopting embedded finance.
6 Reasons to Partner with Embedded Finance Companies
Embedded finance companies form strategic long-term partnerships with banks, enabling them to grow rapidly, compliantly, and profitably. They derive success from two things: the user experience of the borrower and the business benefit to the lender. Embedded finance platforms also take ownership, accountability, and data integrity responsibility, as the US regulatory compliance frameworks are applicable to them as well. That’s why these partnerships create a win-win situation for financial institutions, especially small community banks in the US with budget, resource, and time constraints, through:
1. Accelerated Time-to-Market
Embedded finance companies come with pre-built API functionality and a connected ecosystem that can be integrated in a ready-to-go form, reducing product launch cycles by an impressive margin. Whether it is embedded insurance, banking-as-a-service, invoice factoring, or merchant credit cards, these sites allow you to launch what you are offering in weeks, not months or even years. This kind of speed is essential, considering the rapidly growing competitive business environment fueled by large banks, neobanks, and open banking business models.
2. Leveraging the Latest Capabilities
Collaborating with embedded finance companies prevents the need to reinvent the wheel. They bring the latest technologies, integration-readiness with non-financial companies, and innovative financial solutions that a small bank can simply configure and deploy in minimal time. Embedded finance platforms also provide plug-and-play infrastructure, continuous maintenance, compliance layers, and backend support, relieving your teams of high-effort integrations and system updates. Consequently, your institution would be in a position to streamline customer retention processes and portfolio expansion as opposed to the backend multiplicity.
4. Promoting Revenue-Sharing Collaborations
Embedded financing enhances brand reach, deposit pipeline, and credit origination figures without necessarily pitting brands to compete. It also helps banks utilize the existing customer loyalty of other brands to act as a real-time use case of credibility. By defining revenue-sharing payouts, both parties can increase their net profit margins while cutting on resource or technology overheads.
5. Improved Data-Driven Decisioning
The ecosystem enabled by fintech provides real-time behavioral as well as transactional data that is superior to the traditional models of credit scoring. Because you place your lending products into already busy platforms, such as sales volume, cash flow, repayment behavior, and invoice pattern, you will find more informed areas to make credit decisions, prices, and cross-sell.
6. Compliance-Ready Innovation
The best-in-class embedded finance companies offer solutions equipped with automated compliance logging, audit-trailing, and reporting. They also automatically update policies and algorithms based on the new regulatory changes in the framework. They offer data security, KYC/AML frameworks, audit trail, and consent-based data sharing that must be used to meet federal and state lending regulations.
How to Find the Right Embedded Finance Partner
The highly flexible, profitable, and agile nature of embedded finance has attracted many players to the field. According to a Tracxn July 2025 report, there are 913 active companies in the embedded finance sector across the US. This number is expected to grow fast as more white-label embedded finance platforms enter with solutions like omnichannel payment options, debit card-based credit features, and other innovations catered to modern customer needs. The highly competitive landscape also emphasizes the importance of extensive evaluation by stakeholders of financial institutions to ensure a profitable, long-term partnership. Here are the traits an ideal embedded finance platform carries with proactive transparency:
1. Alignment With Your Core Strategy
Not all embedded finance companies are built for banks. Some are better suited to fintechs or consumer apps. Select a partner that is familiar with the regulated ecosystem you play in and has the ability to tailor its functionalities to your risk appetite, target markets, and product roadmap.
2. Technology Compatibility and API Maturity
Ensure the partner platform includes the APIs that are adequately secure and well-connected in terms of interconnectivity, and available to integrate with your core banking system, CRM, and other digital resources. Look around to discover developer support, sandboxes infrastructure, real-time data syncs, and low-latency performance. Scalable technology must be an extension of your institution and not a workaround.
3. Regulatory and Compliance Support
Ask about data privacy policies, consent regime, identity verification regime, and fraud-prevention regimes. Reputable embedded finance providers should also incorporate SOC 2, PCI DSS, or ISO with their offerings already, or are keen on sharing compliance statements in order to guarantee your audit or regulatory reviews.
4. Customizability of Financial Products
Your partner should not offer a “one-size-fits-all” approach. Rather, find embedded finance companies that enable them to further tailor the credit parameters, loan pricing, repayment terms, UI/UX flows, and branding so that you control the customer experience and credit risk profile.
5. Proven Track Record and Community Engagement
Always check references and case studies. Credible embedded finance companies indicate quantified success through collaborations with other banks, credit unions, or financial institutions. Ask present rates of expansion in deposits, increased rate on loans after acceptance, fall in onboarding, or increased rate of consumer participation. Also, go through the informative empowerment and community engagement done by the partner, through their blogs, e-books, and whitepapers. If a reputed global has partnered with them for industry welfare purposes, it can be considered a green flag.
Final Takeaway
Embedded finance is here to stay, and to stay the preferred choice for their customers, banks need to find ways to “integrate” embedded finance into their existing strategy. Whether you feel your bank is ready for this trend or not yet, the need to partner with embedded finance companies is only going to increase in the weeks and months ahead. The best course of action is to take a hard look at how embedded finance could be used at your business now, before too many early movers have captured the market.
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FAQs about Embedded Finance Companies
1. What exactly do embedded finance companies do?
Embedded finance companies are assisting banks and non-banks to integrate financial services, such as lending, payments, and insurance, into the digital platforms of third parties through APIs and modular technology. These make it easier to experience smooth financial activities without approaching a bank.
2. Can embedded finance be a safe companion of controlled banks?
Indeed, key players in the embedded finance sector develop the infrastructure with data privacy, compliance, KYC, and AML infrastructure in mind. They are aimed at helping the banks meet the regulatory requirements and spur creativity.
3. Can embedded finance companies help banks grow deposits?
Absolutely. Banks can offload white-labeled services paid by the fintechs with which they partner, to gain new customers, drive stickiness, and increase low-cost deposit inflow at virtually the same cost to acquire as via branch or digital channel.
4. What forms of loans can be portrayed by embedded finance firms?
Banks are able to incorporate small business lending, equipment financing, BNPL, merchant cash advances, invoice financing, and others. Such products are customized based on the user behavior of the platform partner and their credit requirements.
5. Why choose Biz2X over other embedded finance companies?
Biz2X is dedicated to embedded business lending and couples AI credit scoring with compliance-grade APIs and deep-banking expertise. In relation to quick implementation, programmable customization, and lending investments returns, regional banks are dependent on it.
