By Shammi Thakur, Research Director, Vyansa Intelligence
Embedded finance is moving financial services closer to the activity that creates the need for them. A merchant can receive its sales proceeds inside a commerce platform, a driver can access earnings through a mobility app, and a business can use a financial account without building its relationship around a conventional bank interface. The important change is not simply where the transaction happens. It is who controls the workflow around it.
That creates a different role for traditional banks. A bank can remain responsible for the deposit account, regulated payments, lending capital, safeguarding, compliance, fraud controls, or other infrastructure while another company owns the screen the customer sees. In other words, the bank may still manufacture the financial product, but the platform can become the place where the product is discovered, selected, and used.
Embedded Finance Changes the Sequence of a Banking Interaction
Conventional banking generally starts with the financial institution. A customer approaches a bank to open an account, request financing, make a payment, or obtain a card. The financial service then becomes part of another activity.
Embedded finance reverses that sequence. The customer starts with an existing activity, and the financial service appears within it.
Consider the different sources of context available to non-financial platforms:
- A commerce platform can see when a merchant receives an order or expects a payout.
- An accounting platform can have visibility into invoices, expenses, and receivables.
- A marketplace can identify when a seller needs to receive funds.
- A mobility platform can see when a driver earns money and needs access to it.
- A payroll system knows when wages are scheduled and can connect payment services to that workflow.
That context can make a financial product easier to discover at the moment it is needed, subject to applicable consent, privacy, and regulatory requirements. The distinction is important because embedded finance is not simply about adding another feature to an application. It changes the starting point of the financial relationship.
Shopify Shows How the Banking Relationship Can Move Into Commerce
Shopify Balance is a useful example because the financial service is connected directly to the merchant’s existing commercial workflow.
Eligible merchants can receive Shopify Payments payouts into Shopify Balance and use the account to manage business funds, pay bills, make purchases, and access a connected business card. Shopify describes Balance as a financial account integrated into the merchant’s store administration rather than a conventional standalone bank account. Shopify also identifies financial-institution partners involved in providing the underlying regulated services.
The important point is not the individual product. It is the sequence.
A merchant sells through Shopify, receives the money through the same environment, manages those funds there, and can use them for the next business activity. The financial service has effectively moved closer to the merchant’s operating system.
That creates a different role for the bank underneath the experience. The financial institution may still handle regulated functions, but the commerce platform can own the workflow in which the financial service is discovered and used.
Traditional Banks Still Provide the Infrastructure That Makes Embedded Finance Possible
Moving the financial interface into another application does not remove the complex infrastructure underneath it. Someone still has to manage:
- account and ledger functions
- payment processing and settlement
- identity verification
- KYC and AML controls
- fraud detection
- transaction monitoring
- reconciliation
- regulatory reporting
- customer complaints and disputes
- safeguarding and other regulated responsibilities
This is where the broader development of payment infrastructure becomes relevant.
MarkNtel Advisors’ Payment as a Service research estimates that the Payment as a Service market was worth USD 14.49 billion in 2025 and is projected to reach USD 74.90 billion by 2032, representing a 25.64% CAGR during 2026–2032. Retail and e-commerce represented the leading end-user segment in its 2026 assessment.
The significance of the data is not that Payment as a Service and embedded finance are identical, but that they are not.
The connection is that embedded financial experiences require financial capabilities to be exposed, connected, processed, and managed through infrastructure that other platforms can access. As payment capabilities become more modular and service-based, they become easier to incorporate into non-financial products. For traditional banks, that means infrastructure quality increasingly becomes part of the competitive equation.
A bank may no longer be competing only on the attractiveness of its mobile application. Its ability to provide reliable payment services, connect systems, support partners, process transactions accurately, and maintain controls can determine whether its capabilities can successfully sit underneath another company’s product.
The Real Issue Is Customer Ownership
The hardest question for traditional banks is not whether they can connect an API.
It is whether they still own enough of the customer relationship after the connection is made. Consider a merchant receiving working-capital financing through its commerce software. The bank may provide the capital and underwriting, but the software platform controls the moment when the merchant encounters the offer.
The platform also controls the surrounding context. The merchant is already reviewing orders, inventory, sales, and cash flow. Financing becomes another function within that workflow rather than a separate visit to a bank. That changes four parts of the relationship:
- Product discovery: The customer may encounter the financial service through the platform rather than through the bank.
- Customer attention: The platform becomes the environment in which the customer repeatedly interacts with the product.
- Context: The platform may understand the commercial activity surrounding the financial need.
- Brand association: The customer may remember the platform through which the service was delivered rather than the institution providing the regulated infrastructure.
None of this eliminates the bank’s role. It changes where that role sits.
Uber Illustrates Another Side of Embedded Finance
Uber’s Pro Card demonstrates what happens when financial services are connected directly to the activity that generates income. Uber states that eligible U.S. drivers can use the Pro Card to receive and manage earnings, access the associated banking wallet, and use card-based financial services within the broader Uber ecosystem. Uber identifies Branch as the card technology provider and Evolve Bank & Trust as the provider of banking services.
Again, the important feature is not the existence of another debit card.
It is the workflow: Work, Earn, Receive Funds, Manage Funds, Spend, or Transfer
The financial product is tied to the economic activity itself.
That is where embedded finance can become more powerful than a conventional digital banking product. The customer does not have to switch contexts to access the financial function. For banks, that raises a difficult distribution question. If financial services increasingly appear inside commerce, mobility, payroll, software, and marketplaces, the bank-owned app may become only one of several places where customers interact with banking capabilities.
Payments Provide the Natural Entry Point
Payments are particularly well suited to embedded finance because they already sit inside commercial transactions. Once payment acceptance or payouts become part of a platform, additional financial services can be connected around the same relationship.
For example, the sequence can move from:
- Payment
- Payout
- Account
- Card
- Financing
- Cash Management
Not every platform will offer all of these services, but the underlying logic is similar. A financial need appears within an existing transaction flow, and the platform has an incentive to keep the associated activity within its ecosystem. India provides useful context for the size of the payment environment surrounding this development.
According to Vyansa Intelligence, the India cards and payments market was valued at USD 939.72 billion in 2025 and is projected to reach USD 1,628.39 billion by 2032, registering a CAGR of 8.17% during 2026–2032. Cards accounted for 75% of the market in 2026, according to the research. The figure should not be interpreted as the size of India’s embedded-finance market. Its relevance is different: it demonstrates the scale of the payment activity around which financial functionality can increasingly be distributed through digital platforms.
What Traditional Banks Need to Reconsider
Embedded finance changes several areas simultaneously.
| Banking area | Traditional model | Embedded-finance model |
| Distribution | Bank branches, website, and mobile app | External platforms and digital workflows |
| Product discovery | Customer searches for a banking product | Financial service appears during an existing activity |
| Technology | Core systems support bank-owned channels | APIs connect financial capabilities to third-party platforms |
| Customer context | Bank primarily sees financial-account activity | Platform may also see commercial or workflow activity |
| Risk management | Greater control over customer channel | Partner oversight becomes part of operational risk |
| Relationship | Bank usually owns the primary interface | Platform may own the interface while bank supplies regulated services |
| Revenue | More value tied to direct customer relationship | Value can be divided across platform, infrastructure provider, and bank |
The technology change is only one part of the equation. Three less visible issues may prove just as important.
- Partner governance: A bank cannot treat onboarding as the end of partner management. Transaction monitoring, fraud exposure, complaints, compliance controls, outages, and material product changes require continuing oversight.
- Accountability: One customer-facing application may involve several organisations. Contracts and operating processes need to establish who handles customer complaints, fraud events, disclosures, KYC and AML decisions, data handling, reconciliation, and regulatory reporting.
- Economics: A bank needs to understand what it is actually earning from the relationship. The value may come from deposits, payments, lending, infrastructure fees, or a combination, while the platform captures part of the customer relationship.
The Next Phase Will Not Be One Model
Embedded finance does not mean that every bank needs to become a technology platform or that every platform will become a bank. The structure is likely to remain layered.
A commerce company may own the merchant relationship. A technology provider may supply orchestration and APIs. A regulated financial institution may provide the account, payment capability, lending capital, or balance-sheet capacity. That creates several potential roles for banks:
- Infrastructure provider: supplying regulated financial capabilities to platforms.
- Embedded product partner: distributing selected banking products through third-party experiences.
- Specialist provider: focusing on payments, lending, deposits, or another area where the institution has strong capabilities.
- Direct distributor: maintaining its own customer-facing channels while also making selected products available through partners.
The appropriate model depends on the bank’s technology architecture, regulatory responsibilities, risk appetite, target customers, and economics.
The Banking Relationship Is Moving, Not Disappearing
The rise of embedded finance does not mean traditional banking becomes irrelevant. It means banking services can increasingly be consumed without making the bank the starting point of the interaction.
That is the more important change. Shopify demonstrates how business banking functions can become part of commerce. Uber shows how financial services can become part of an individual’s earnings workflow. Payment infrastructure data from MarkNtel Advisors shows the scale of investment and activity around service-based payment capabilities, while Vyansa Intelligence’s India cards and payments research shows the size of the broader transaction environment in which those capabilities operate.
For traditional banks, the question is therefore not simply whether to participate in embedded finance. It is where they want to participate.
The bank can remain the regulated engine behind a financial product. But if another company controls the workflow, customer attention, and point of discovery, that company may increasingly control the relationship around the product. Embedded finance is ultimately changing the distribution layer of banking. The institutions that understand that distinction will have to think beyond APIs and individual products. They will need to decide which customer relationships they want to own, which capabilities they are willing to distribute through partners, how responsibility will be divided, and where the economics of the relationship actually sit.
Author Bio:
Shammi Thakur is Research Director at Vyansa Intelligence, with more than 15 years of experience in strategic market intelligence, industry forecasting, competitive analytics, and technology-sector research. He leads research mandates across diverse industries, developing evidence-based analysis and strategic perspectives for decision-makers.
