Embedded FinTech: How it fits in

Embedded FinTech: How it fits in

Created by
Mike DeFeo
July 26, 2023

Embedded finance is revolutionizing the world of financial services - the segment is expected to grow at a 30% CAGR through 2029. By integrating financial services directly into non-financial applications, companies across sectors can offer services such as payments, lending, or insurance within their own platforms. The impact is profound: this shift is opening new pathways to profitability for host applications while introducing a fresh set of distribution channels for the products already offered by traditional financial service providers.

However, the transition to embedded finance is not without challenges. It necessitates specialized financial expertise, which many host companies may not possess in-house. For instance, creating a loan offering demands a deep understanding of risk assessment, regulatory compliance, and credit management. To address these challenges, the use of third party APIs and out-of-the-box financial solutions has emerged as an efficient means of bridging the expertise gap.

In order to conceptualize how an embedded financial product may be implemented, let's explore a simplified framework of the necessary components. Four key layers represent much of what is required:

1. Interface Layer

This is the crucial link connecting your business with the traditional financial system. It encompasses banking APIs, payment initiation APIs, and occasionally, regulatory licenses. When built in-house, this layer involves a multitude of manual data collection, management tasks, and regulatory compliance, which can be labor-intensive and time-consuming.

2. Analytics Layer

Positioned downstream from the interface layer is the Analytics Layer. This is where raw data is transformed into actionable insights. For instance, an underwriting engine, residing in this layer, assesses credit risk and determines loan eligibility. If built in-house, this layer requires intensive data normalization, enrichment, and analysis capabilities.

3. Customization Layer

This layer allows the intelligence from the analytics layer to be tailored to suit the specific needs of your application or use case. In the case of B2B BNPL (business-to-business buy-now-pay-later) solutions, it involves adapting the financial services to cater to the specific vertical of end-users' unique needs. If developed internally, this requires a thorough understanding of customer nuances and the adaptation of financial processes accordingly.

4. User Experience Layer

This final layer encompasses the user-facing elements of the embedded finance module. It's where customer inputs and actions are collected and translated down through the stack. If developed in-house, this layer involves designing a comprehensive, user-friendly interface from the ground up.


Understanding this framework can drastically improve a business's ability to select and implement an embedded finance solution. For instance, a business prioritizing its own user experience might opt for a solution that omits the UX layer, giving them the freedom to design their own interface. Conversely, businesses aiming for speed to market will benefit from an all-inclusive solution that covers all four layers.

However it applies to specific business needs, this layered framework can help application developers select the solution that best aligns with their strategic priorities and conceptualize the implementation. Thus, accelerating their path to becoming a part of the rapidly evolving financial ecosystem.

At our Basis, we understand the complexities of implementing embedded finance solutions and we're dedicated to providing first class products that power B2B financial technology experiences.