As embedded finance becomes more popular, it’s changing the financial services industry. Embedded finance is when financial services are integrated into non-financial places. For example, an e-commerce site allows users to apply for a loan or access other financial services. A boost in this has been from open APIs (application programming interfaces) which let non-financial companies add financial services to what they offer customers.

In the past, if a non-financial company like a retailer wanted to offer embedded financial services, they would need to build everything from scratch. This required major development work and regulatory licenses to offer financial services. APIs have changed the game by allowing non-financial companies to integrate with a financial services provider via their API simply. The financial services provider handles all the back-end infrastructure and regulatory requirements.

Here are some key ways APIs enable embedded finance:

Simplified integration: APIs provide a straightforward way for non-financial companies to integrate with financial service providers. The API handles all the complexity behind the scenes.

Pre-built solutions: Many financial service providers offer fully embedded solutions for different verticals via APIs. For example, ready-made solutions for e-commerce, gig economy, etc.

Flexible customization: APIs allow embedded financial products to be customized to match the specific brand and user experience of the non-financial company.

Scalability: APIs and cloud technology enable embedded financial services to scale rapidly. The infrastructure is handled by the financial provider.

Speed to market: With APIs, embedded financial services can be quickly implemented, taking just weeks or months compared to years traditionally.

Key Embedded Finance API Use Cases

Some leading API-enabled embedded finance use cases include:

Shopping: Enable installment plans, credit services, etc. within an e-commerce site.

Gig Economy: Allow workers quick access to earned wages or lending services within a work platform.

Commerce: Provide financing for business purchases directly in a B2B commerce site.

Neobanks: Banking and financial services fully embedded in a mobile lifestyle app.

Software: Embed invoicing, payments, and financing in software like CRM or ERP systems.

Driving Innovation Through Open Finance

The open finance movement is getting even more advanced with embedded finance. Open finance is when common technical standards and APIs are used to share financial data between institutions, fintechs, developers, customers, and others in a secure way.

It’s based on the concept of open banking which lets people easily access their bank account with APIs. Open finance uses those same APIs to increase innovation in banking service like investments, insurance, lending and more. This helps make finance more versatile by integrating it into everyday activities.

Startups are using these open finance services to make better services than already established banks. On the other hand, traditional financial institutions are teaming up with these small fintechs so they don’t get left behind. The competition and collaboration from open banking ends up benefiting customers as it increases convenience while minimizing cost.

The Incorporation of Technology is the Way Forward.

With APIs at the helm, embedded finance is still in its early stages. In spite of this, it presents a monumental shift for the financial industry. Instead of being offered through specific providers, financial services will be built into other brands.

This change uncovers new ways for businesses to make money and give customers even better experiences. Not only does it bring about a more personalized experience, but now customers can get their financial services catered to them at any point in time without having to switch services.

APIs removing barriers and making innovation easier is the sole reason behind this growth. With such a stronghold, it promises that fintech companies will only continue to challenge established norms and unlock even more possibilities as time passes. Thank you for your interest in Bahaa Abdul Hussein blogs. For more information, please visit