A FinTech Rising Executive Technology Brief
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In my post “10 Years of FinTech Rising,” I noted that an overarching theme of the last 10 years had been the digital evolution of finance and banking systems. I characterize this shift as a technology change to modern digital processing, with an emphasis on cloud-based systems, from electronic data processing, with its emphasis on mainframe computers, too.
Over the last five or six years, this technology shift has resulted in new business models, including embedded finance, banking as a service, neo-banks, and related delivery models for payments, wealth, and insurance services. Technology and the business models it enables represents a move toward digital connected finance.
The way embedded finance enables non-financial companies to offer financial services products to their consumers is also emblematic of a tighter integration of technology and business roles within organizations, a primary theme of our Executive Technology Briefs. As FinTech Rising reporter Jessica Purdy writes, “This trend underscores the importance of digital integration and customer-centric innovation for banks seeking to remain relevant in an evolving market.”
Surge in Embedded Finance Adoption
Embedded finance, which integrates financial services directly into non-financial platforms, is rapidly changing how consumers and businesses interact with financial products. Research from EY predicts that “embedded payments is on track to grow at a 23% compound annual growth rate between 2021 and 2026,” with “the volume of payments through embedded channels expected to reach $6.5 trillion by 2025.”
This surge in adoption has led to significant changes in the financial landscape, with the share of independent software vendors (ISVs) offering both payment acceptance and embedded finance features increasing rapidly. Traditional banks are adapting by forming partnerships with fintech companies through Banking-as-a-Service (BaaS) models, a strategy aimed at maintaining competitiveness in this new era of integrated financial services.
The rapid growth of embedded finance, especially in payments, is driven by key technological advancements such as APIs, mobile technologies, and artificial intelligence, which enable seamless integration of services like payments, loans, and insurance into platforms consumers already use regularly.
Our Executive Technology Brief explores the technological drivers behind this growth, its impact on traditional banking, and the future trends that will shape the embedded finance landscape. By understanding these dynamics, businesses can better position themselves to capitalize on the opportunities presented by embedded finance.
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