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.

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.

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.

It’s not alone in the race. An influx of new BaaS entrants indicates the emergence of an industry to underpin embedded banking.

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.

Some of its competitors are moving toward embedded finance, another potential growth area for Plaid. In September, open banking competitor Tink teamed up with energy provider Enel X to fuel the development of personal finance management tools for the latter’s end users.

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.

eBay seeks to plug small business financing gap with an embedded lending product for its UK SMB sellers. eBay and other ecommerce firms will likely add more financial services, like accounting solutions, to better serve their user bases.