By Ifeyinwa C. Okoli

Imagine ordering an Uber or buying your morning coffee without ever noticing the financial wizardry embedded into these actions. Embedded finance is a movement so subtle yet so potent that it’s reshaping our financial interactions without most of us realizing it. As we tap into services like digital wallets or ‘buy now, pay later’ options, we are participating in a silent revolution that intertwines financial tools within non-financial apps.

What is Embedded Finance?

Embedded finance is the seamless integration of financial services such as payments, lending, and insurance by non-banking entities into their primary offerings. McKinsey describes it as the inclusion of financial products within a broader non-financial context. Take, for example, instant loans or payments offered by service apps or buy now, pay later options at checkout.

The Financial Tools Hidden Within

  • Digital Payments and Wallets: Integration of payment tools like Apple Pay or PayPal into apps and websites for easy commerce.
  • Instant Payouts: Gig-economy platforms offering payment cards that ensure instant compensation for workers.
  • Point-of-Sale Loans: Retailers provide installment loans at purchase, often in partnership with lenders.
  • Embedded Insurance: Policies for travel or electronics that are directly included in purchase platforms.

These innovations blur the lines of commerce and banking, making financial transactions easier and more accessible.

The Rapid Adoption of Embedded Finance

This trend is far from niche. An estimated 60% of UK adults utilized embedded finance services last year, with higher adoption rates among younger users. The convenience, speed, and personalization these services offer are driving a notable proliferation.

Reports project the global embedded finance market to reach $104.8 billion by 2024 with explosive growth likely propelling it to a multi-trillion dollar industry by 2030. This transformative potential is mirrored in Asia’s social media and messaging apps that enhance shopping experiences through integrated payments.

The UK: A Hub for Fintech Innovation

The UK stands as a frontrunner in embracing this wave, backed by a robust fintech ecosystem and progressive regulatory support. Initiatives like Faster Payments and Open Banking have set foundational steps for fintech startups and traditional banks to strategically cooperate. UK government goals emphasize embedding payments into daily activities, fostering a forward-looking payments ecosystem.

The rise of embedded finance fosters a collaborative environment where banks and fintech work in harmony rather than competition. Partnerships like Citigroup’s investment to fund a fintech platform highlight the blend of scale and innovation within the industry. As AI and data analytics refine these services further, challenges such as fraud, privacy, and debt management arise, underlining the importance of regulation and clear consumer protection policies.

Embedded finance is becoming the underlying infrastructure of our digital economy. It offers pathways to financial inclusion, providing unprecedented access to credit for underserved businesses and consumers. The World Bank highlights this trend as a facilitator of new financial inclusions nationwide, while the UK’s vibrant community and history of payment innovations position it well for future growth.

As the sector evolves, balancing innovation with oversight is crucial. Policymakers need to maintain flexible regulation without sacrificing stability, while businesses invest in transparency and trust. The ongoing evolution of embedded finance holds the promise of significant societal impacts—quietly, yet profoundly reshaping the financial landscape.

Ifeyinwa Okoli is a Board Member and Non-Executive Director of Prospa Capital Microfinance Bank Ltd, with extensive experience in digital payments, identity management, and fintech policy in Africa.