The UK-based neobank’s founder and CEO Anne Boden outlined plans to offer banking as a service globally in 2022, giving Starling a potential opening into embedded finance.

Shake-ups in the new year will include hyper-personalization, tech companies venturing further into embedded finance, and the prospect of super apps in Western countries.

BaaS and Embedded Finance: 2 Sides of the Same Coin. BaaS platform providers monetize the users and usage of embedded financial services, as do the fintechs and consumer brands that embed those services.

In 2021, VCs allocated $4.25 billion in embedded finance investments, almost three times the amount of 2020 funding, according to PitchBook. Payments is the most mature area of embedded finance. Big Tech’s competitors should take note if embedded payments is any indication of what might be on the horizon for other financial service sub-verticals.

Consumers’ growing willingness to get their financial services from non-FI providers is spurring consumer brands to embed financial elements in their products and services. But this new form of finance will mean dramatic changes for incumbent and startup FIs.

In 2021, venture capital firms allocated $4.25 billion in embedded finance investments, almost three times the amount of 2020 funding, according to PitchBook. Payments is the most mature area of embedded finance. Big Tech’s competitors should take note if embedded payments is any indication of what may be on the horizon for other financial services subverticals.

Embedded finance experiences are proliferating in the physical world. Today, they manifest as checking accounts and debit cards within a financial wellness app, for example, or payments in a chat app or in ecommerce checkout flows (such as BNPL). Embedded finance for gamers extends this experience to the metaverse.

Embedded Finance. Super Apps. Speakers. Tiffani Montez, Principal Analyst, Banking. Tyler Brown, Senior Analyst, Banking.

Embedded Finance Will Enable Software Providers to Reach a Wider Clientele. Embedded finance lets nonfinancial companies seamlessly integrate financial products and services—including payments—into their native platforms. The embedded finance market is set to more than triple through 2026, per Juniper.

Neo Financial’s partnership with retailers could be the beginning of a foray into embedded finance.

Embedded Finance Is Reducing Onboarding Friction. As embedded finance—which includes integrating payments directly into apps, platforms, or invoices—grows in popularity, automated AP/AR systems are becoming more accessible than ever. Now, SMBs may not have to take on an entirely new platform to implement automation, instead accessing the systems via the software applications they’re already using.

Instead, brands like Facebook, Google, and Klarna will bolt on offerings to their existing services through routes like embedded finance and BaaS. Per the geographic scope of this report, we will focus predominantly on these super apps. The targeted model is breaking into two subcategories as the Western super app market evolves:.

Embedded finance could be particularly lucrative, as its new revenue volume is projected to soar by 922%, from $22.5 billion in 20202 to almost $230 billion by 2025, per Lightyear Capital. SoFi’s string of acquisitions could give its neobanking arm a competitive advantage over incumbents:. Its newly assembled, best-of-breed tech stack is unencumbered by harder-to-manage legacy systems.

eBay rolls out lending to UK SMBs: The ecommerce giant is partnering with embedded finance platform YouLend to extend loans to its sellers—giving the former a chance to make itself stickier for platform sellers and the latter access to data and loan growth.

While doubling down on its embedded finance solution puts Younited Credit in competition with the likes of Klarna and Afterpay, the booming ecommerce market in France could also present a lucrative growth opportunity.

As embedded finance pulls a wider set of enterprises into card issuance, the client set for issuers is broadening. Modern card issuers like Marqeta partner with issuers to offer a ready-made solution for businesses looking to enter the card space.

II: What does the future of embedded financial services look like within the shopping journey? BR: Financial services can be quite important throughout the shopping journey, so you'll see more of these things matter to users earlier in their shopping journey. Embedded finance is about meeting the user in the moment with the financial service that will solve a problem for them.

II: Will Piermont enter the embedded finance space and offer banking as a service to non-financial companies? WC-L: Yes, because in our view, even if they’re not a fintech, they’re still our partner in doing client acquisitions. What we have built into the products and the tech stack can easily and effectively serve non-financial institutions.

Responsible’s BuyBack plugin, on the other hand, is embedded within an ecommerce site as an API or at a store through scanning. As an embedded finance offering, the goal for both fintech and site is to make consumer transactions more seamless and to create a deeper brand affinity.

Big Tech’s “on ramp” to financial services will be embedded finance—the inclusion of financial products and services in the customer journeys of nonfinancial companies. In 2021, VCs allocated $4.25 billion in embedded finance investments, almost three times the amount of 2020 funding, according to PitchBook.