Embedded finance is revolutionizing the payments industry by integrating financial products into non-financial platforms. This new model allows small businesses to open deposit accounts, order debit cards, and meet their financing needs through e-commerce or accounting platforms, bypassing traditional banks. The operators of these platforms are often software companies that partner with banks and technology providers to offer seamless, convenient, and easy-to-use customer experiences.

The embedded-finance market has already reached $20 billion in revenues in the United States and is expected to double in size within the next three to five years. Key players in this market include payments-focused technology providers, which are leveraging their money movement capabilities to attract distributors and expand into products traditionally dominated by banks, such as lending.

For financial institutions, embedded finance presents both opportunities and challenges. Banks with limited footprints or localized relationships may see it as a way to expand their revenue base, while others may face significant cannibalization risks. To succeed in this market, financial services firms and fintechs need to implement four key initiatives: choosing a strategy, establishing a developer experience, building capabilities to support distributors, and developing support and risk services.

The partnership between FIS and Bond is a notable example of this trend. By leveraging FIS’s extensive financial services capabilities and Bond’s advanced technology, non-bank institutions can adopt a streamlined, modern approach to embedded finance, benefiting both fintechs and non-bank brands. This collaboration represents a significant win-win scenario, providing enhanced capabilities and streamlined solutions to customers.

Overall, the embedded-finance revolution is transforming the way financial services are delivered, with a growing number of large organizations entering the market to drive significant advancements in the sector.