Embedded finance has spent the past decade bringing financial services closer to the customer. Its next phase could be about making those services intelligent enough to anticipate what customers need and help shape the decisions they make.
Payments, lending, cards and other financial products are increasingly being integrated into the software and platforms where consumers and businesses already operate. But as the technology matures, the opportunity is extending beyond simply removing a few clicks from a transaction.
For financial services providers, the next battleground could be intelligence.
Software platforms already hold vast amounts of contextual information about their customers, from business cash flow and purchasing behaviour to payment activity and operational needs. Combined with AI and increasingly sophisticated embedded infrastructure, that data could allow financial services to become more proactive, offering products and guidance at precisely the moment they are relevant.
That could reshape the relationship between banks, FinTechs and the platforms that increasingly sit between financial institutions and their customers.
Manuel Silva Martinez, general partner at Mouro Capital, said embedded finance represents a broader expansion of where financial services can be delivered, rather than a straightforward replacement for traditional banking.
“Financial services are certainly branching out of their traditional product wrapper and into other customer journeys, delivered as APIs and lines of code rather than standalone products. But that is not at the detriment of new, direct-to-consumer propositions that follow a more traditional product philosophy.”
This distinction could become increasingly important as the market develops.
The future of embedded finance is unlikely to be defined by a simple migration from banking apps to third-party platforms. Instead, customers could interact with a mixture of traditional and embedded services, depending on the complexity and context of the financial decision they are making.
For simple, transactional needs, the financial product may become almost invisible. For major decisions requiring trust, advice or human judgement, the traditional banking relationship could remain important.
The result is a more fragmented, but potentially more integrated, financial ecosystem.
From embedded products to embedded intelligence
The first generation of embedded finance was largely focused on distribution.
The idea was straightforward: instead of asking customers to leave an existing platform to access a financial service, the service could be incorporated directly into the journey.
That model is now becoming more sophisticated.
Kunal Galav, vice president, Pleo Embedded at Pleo, said the underlying driver remains a desire for simpler financial experiences.
“The future of finance is about convenience. In the era of AI and intelligent capabilities, businesses want more efficiency, more simplicity and less fragmentation. They expect financial services to be available whenever they need them.”
For businesses, that can mean financial services becoming part of operational software rather than a separate destination.
A company could, for example, access a corporate card through procurement software when a supplier needs to be paid, or receive a short-term credit option through accounting software when its cash flow indicates a funding requirement.
This changes the role of the platform.
It is no longer simply a place where a financial product is displayed. It can become the environment in which the financial need is identified in the first place.
Galav said embedded finance is therefore about more than adding another payment or lending option to a digital product.
“The shift is about eliminating friction across digital finance ecosystems and enabling financial services to be present wherever business happens, at the time that it’s most relevant.”
That could create a significant advantage for software providers.
A traditional financial institution may know a business’s banking history, but its accounting platform could have a much more immediate view of invoices, expenses, cash flow and operational performance.
That contextual information could make it easier to identify when a financial service is genuinely useful, rather than relying on the customer to search for it.
The data advantage moves closer to the customer
This shift towards context could become one of the defining features of the next generation of embedded finance.
Embedded services can be delivered through platforms that already understand how their customers behave, creating the potential for more targeted financial products.
Galav said the adoption of embedded finance is being driven by “integration, context and access”, with platforms able to combine multiple financial tasks within existing workflows.
Rather than managing cards, receipts, spending controls and transactions across separate systems, businesses can increasingly bring those functions together.
This could be particularly valuable for small and medium businesses (SMBs), where financial teams may lack the resources to manage multiple disconnected systems.
The opportunity is not just operational efficiency. Better access to data could also influence financial decision-making.
For example, an accounting platform with a real-time view of a company’s financial position could potentially assess lending requirements within the context of the business rather than relying solely on historical financial information.
That creates a different model for financial distribution.
Instead of a bank asking a business to provide information before deciding whether it qualifies for a product, the platform where that business operates could already have much of the information required to identify and potentially support the financial need.
It is this shift that could make embedded finance more consequential than simply a new distribution channel.
The financial product becomes part of the infrastructure of the business itself.
AI could turn embedded finance into a financial adviser
The development of AI could push this model further.
Today, many embedded financial services are triggered by an identifiable transaction or need. A customer buys something and receives a payment option. A business needs working capital and is presented with a lending product.
Agentic AI could eventually make these systems much more proactive.
Rather than waiting for a customer to request a financial service, an AI-powered system could identify an emerging need, assess the available options and potentially take action.
Galav believes this could create a new role for financial services, moving them beyond transactional efficiency towards strategic decision-making.
“Powered by agentic workflows, we’ll see banking and financial services become less about transactional efficiency and more about giving customers strategic, data-driven guidance in real time while driving up eligibility and access.”
For an SMB, the platform managing its finances could potentially identify that cash flow is tightening, assess upcoming payments and recommend a funding strategy. It could then help execute that decision rather than simply displaying a financial product.
Galav described this potential future as giving businesses ‘a digital CFO’ in their pocket, capable of supporting decisions around cash flow, investments and FX based on the specific circumstances of the business.
That represents a fundamental shift in the proposition.
Embedded finance would no longer simply mean putting banking products inside software. It could mean turning software into an intelligent financial interface.
The physical world is also becoming embedded
While much of the embedded finance conversation focuses on software, the technology is also changing how financial services work in real-world situations.
Rehana Mitha, managing director at Edenred Payment Solutions, said customers increasingly expect financial services to be available at the point of need rather than through separate banking applications.
Edenred Payment Solutions has seen this model applied through virtual payment cards.
“At this year’s G7 Summit, accredited journalists received virtual payment cards via SMS using Web Push Provisioning, allowing them to add the cards directly to a digital wallet and immediately use them to pay for meals,” Mitha said.
The significance is not simply that the payment was digital.
The financial service was delivered through a channel the customer was already using, without requiring a separate application or a lengthy setup process.
That same principle can be applied in sectors where access to money is particularly time-sensitive.
Mitha highlighted insurance as one example, where virtual payment cards can potentially allow customers affected by emergencies or travel disruption to receive funds immediately.
“In sectors such as insurance, embedded financial services are complementing traditional banking by supporting situations where speed is critical. Virtual payment cards can enable instant payouts for stranded travellers or people affected by emergencies, whereas traditional bank transfers may take longer depending on the payment rails involved. It’s about giving organisations another option when immediate access to funds really matters. Simplifying the customer experience eliminates the need for users to pay up front and insurers to go through a reconciliation process to reimburse the funds at a later date. With virtual payment cards, funds are instantly available.”
The example demonstrates how embedded finance is increasingly about solving a specific problem within a broader customer journey.
The financial product does not need to become the focus of the experience. In fact, its success may depend on the opposite.
The better embedded finance becomes, the less customers may notice that they are using a financial service at all.
Banks may become more important as they become less visible
That could create a paradox for traditional financial institutions.
As financial services move into other platforms, banks could become less visible to customers while remaining essential to the infrastructure underneath those experiences.
Silva Martinez expects a hybrid model to emerge.
Traditional relationship banking will remain valuable for customers dealing with complex products or situations where trust and human interaction matter. But simpler financial services are likely to be increasingly accessed through the platforms customers already use.
This means banks do not necessarily need to win every customer interaction directly.
Instead, they may need to ensure their infrastructure, products and regulatory capabilities can support the organisations that do own those interactions.
Silva Martinez said banks are beginning to develop their own embedded finance propositions, but argued that entrepreneurs can be faster at identifying new opportunities for API-delivered financial products.
That leaves financial institutions with several possible roles.
They can build their own embedded experiences. They can partner with FinTechs. Or they can provide the regulated infrastructure that allows other companies to deliver financial services under the hood.
The third option could become particularly important as more companies seek to offer financial products without becoming banks themselves.
Regulation will become part of the customer experience
The expansion of embedded finance also brings greater responsibility.
The more financial services are distributed across third-party platforms, the more important questions around security, resilience, data and regulation become.
Mitha said technologies such as tokenisation will remain important in protecting sensitive payment data while supporting frictionless experiences.
She also stressed that innovation will need to be accompanied by regulatory oversight.
That becomes particularly relevant as AI starts to influence financial decisions.
If an automated system identifies a customer as eligible for credit, recommends a financial action or executes a transaction, responsibility cannot simply disappear into the software layer.
The financial ecosystem will need to maintain clear accountability even when the customer experience becomes increasingly invisible.
For banks, that could strengthen rather than weaken their role.
Their regulatory expertise, safeguarding responsibilities and infrastructure may become more valuable as more financial activity moves into non-financial environments.
The future will not be bank versus platform
The biggest misconception about embedded finance may therefore be that it represents a battle between banks and technology platforms.
The three executives point towards a more complicated future.
Banks are unlikely to disappear, but their relationship with customers could change. FinTechs can provide the technology and innovation required to distribute financial services in new ways, while software platforms can provide the context in which financial decisions happen.
The customer ultimately gets a different experience.
Instead of opening a banking app to search for a product, the financial service could appear inside an existing workflow, triggered by what the customer is doing and informed by the information already available to the platform.
Mitha said the distribution of banking has already changed, with services increasingly available “at point of need, in context”.
Consumers are still likely to trust banks with their money, she said, but may increasingly access financial services through other digital platforms.
For Silva Martinez, that points towards coexistence rather than replacement.
“Financial services are no longer confined to direct-to-consumer models. We expect banks to coexist with embedded services, though with more financial activity happening inside the platforms people already use rather than through a direct relationship with a bank. Banks and FinTechs will play on both fields, so the competitive landscape over the next few years is likely to get interesting.”
That competition may ultimately be less about who owns the financial product and more about who controls the context around it.
The companies that understand when a customer needs a financial service, can deliver it securely and can make it useful without adding complexity will have an increasingly important role in the financial ecosystem.
For banks, that means accepting that being central to finance does not necessarily mean being the most visible brand.
For FinTechs and software providers, meanwhile, the opportunity is to turn financial infrastructure into something more intelligent, contextual and actionable.
Embedded finance began by bringing financial products into everyday experiences, and its next chapter could see those experiences start making financial decisions themselves.
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