Embedded finance: banks can’t be invisible

We are currently experiencing the third wave of digitalization, transforming industries by enabling entirely new products and services built on reimagined business models and digital ecosystems.

A quiet shift in how apps deliver financial services is driving banks to rethink their customer strategies. As a recent report from Mobey Forum explains: “Progressive banks are already moving ahead with embedded finance journeys, threatening to leave others behind. If your bank is not yet pursuing a well-defined strategy, you should familiarize yourself with the drivers of embedded finance, its relevance and its impact on the industry’s traditional value chain.”¹

The report predicts that embedded finance transactions in the United States will grow from $2.6 trillion in 2021, roughly 10% of GDP, to $7 trillion by 2026, while in Europe, embedded finance could account for up to 15% of banking revenues by 2030.²

Advances in mobile technology, APIs, cloud computing, and data analytics have made this shift possible. Customers increasingly expect services that are effortless, real-time, and integrated into their daily lives, rather than forcing them through multiple disconnected steps.

“This really is transformational in terms of what banks feel they must offer their customers, especially given the competition from fintechs, neobanks, Big Tech, and other platform providers,” said Dominik Wurzer, Managing Director Digital Banking at G+D Netcetera.

Let us consider the challenges facing financial institutions as they look to establish themselves in this evolving ecosystem.

The challenges

Payments and lending remain the largest segments of embedded finance, but growth is also expected across insurance, tax, accounting, and services for businesses of all sizes. A recent report confirmed this trend, pointing out that embedded finance is already being widely adopted. In the online space, e-commerce platforms are integrating financial services into their customer journeys, helping both consumers and merchants to transact more efficiently. Similarly, business platforms can connect directly with a bank’s APIs, allowing companies to access financial services seamlessly. Use cases range from retail and e-commerce to automotive, mobility, travel, hospitality, healthcare, media, gaming, and utilities.³

“Banks deciding what their role is in embedded finance have to make strategic choices. They could offer platforms that combine financial and non-financial products, provide verticalized offerings, or provide banking-as-a-service. Those that fail to meet customer needs risk leaving room for new competitors,” stated Wurzer.

Three major challenges confront banks:

• Platforms now own the customer journey, putting banks at the risk of fading into the background unless they provide secure and reliable embedded services.
• Technological demands are rising: APIs, real-time decision-making, and automation are essential, and legacy systems often cannot keep pace.
• Fintechs and digital platforms innovate rapidly, unconstrained by older infrastructure.

Banks are still responsible for providing security and trust while remaining compliant, but now these responsibilities extend behind the scenes across multiple partners and channels.

To use just one example, “buy now, pay later” (BNPL) is a form of embedded finance that allows consumers to split purchases into multiple payments directly within the apps or platforms they use. The credit service is seamlessly integrated at checkout, and the platform remains the main interface. In Europe, the BNPL market is growing around 9% annually and is expected to reach about €170 billion this year, led by Klarna, Afterpay/Clearpay, and PayPal.⁴

Security and trust

Embedded finance involves complex ecosystems where multiple parties interact, among them platforms, fintech providers, banking-as-a-service layers, payment processors, and identity verification services. Sensitive data flows across these layers, heightening the risk of breaches or misuse.

Regulations apply, of course. In Europe, this is most apparent through the current iteration of the European Union’s Payment Services Directive, PSD2 (and the upcoming PSD3). PSD2 mandates the use of strong customer authentication (SCA), which promotes secure payments in the EU, while the EU’s overarching data regulation GDPR is very strong on data protection and privacy. However, oversight and enforcement are more complex in this area than in traditional banking, and distributed risk can blur accountability. Operational failures by one partner can compromise an entire offering.

As financial services spread across apps and devices, security must move with the user. Fraud prevention cannot be managed by a single organization. Authentication must adapt in the background, suspicious behavior must be detected in real time, and security must remain seamless. Customers expect instant checkout, one-click credit, and automatic identity verification – but have zero tolerance for fraud.

While embedded finance can help banks reach a broader audience, it also carries significant risks. Chief among them is the loss of direct contact with customers, making it harder for banks to build loyalty or cross-sell additional products. Banks also face profit pressures. Competing to be the chosen provider on a major platform can drive commoditization and lower margins. Growth can be unpredictable, and invisibility can weaken a bank’s brand over time. Technical or compliance failures often land on the bank’s shoulders. Further, success in one area may also create imbalance, and by helping platforms offer excellent financial services, banks may inadvertently cultivate future competitors.

Powering seamless embedded journeys

To navigate these challenges, banks need partners that can secure every step of the embedded payment journey. G+D and its digital payments arm G+D Netcetera provide this foundation. Its use of the frictionless 3-D Secure authentication protocol verifies cardholders during online transactions, allowing low-risk payments to flow without interruption, with only suspicious activity triggering additional checks.

Tokenization replaces sensitive card credentials with secure, single-use tokens across apps, merchant platforms, and digital wallets, protecting data even if a platform is compromised. AI-powered fraud scoring and BIN-attack defense detect anomalies in real time and stop sophisticated threats before they spread across partner networks.

G+D Netcetera’s API-ready platforms allow banks to integrate payment services quickly into e-commerce platforms, mobility apps, and digital ecosystems while maintaining full control over security and compliance. Globally compliant infrastructure ensures authentication, tokenization, and payment processing meet international standards. Together, these capabilities allow banks to offer secure, seamless, and fast embedded experiences, maintaining trust and relevance even when their brand is invisible to the customer.

What’s next

Embedded finance will continue to redefine how consumers and businesses interact with financial services. The revenue opportunity depends on the role each player chooses in the value chain, whether as a platform, product specialist, or full-service provider. Financial services will increasingly operate inside everyday apps and devices, often automatically in the background. Invisibility does not reduce the role of banks; it heightens it. The systems behind the scenes – identity verification, authentication, fraud prevention, and secure payment infrastructure – determine whether embedded finance can be trusted and scaled safely. Banks that modernize, forge strategic partnerships, and embed robust security measures will remain central to the customer’s financial life.

Published: 12/02/2026