Embedded Finance Market Research, 2032
The global embedded finance market was valued at $66.8 billion in 2022, and is projected to reach $622.9 billion by 2032, growing at a CAGR of 25.4% from 2023 to 2032.
Embedded finance, simply put, is when a non-financial company offers financial products and services through APIs and platforms. In addition, embedded finance allows companies to access and utilize financial services provided by third parties. Furthermore, the market has presented a number of opportunities for both established financial institutions and innovative fintech startups to collaborate and expand their customer reach in new and innovative ways.
The rising trend of digital transformation in several sectors including finance is the key factor driving growth of embedded finance market size, as it is revolutionizing the way financial services are delivered and consumed. Furthermore, as consumers increasingly prioritize seamless and hassle-free experiences, they seek out financial services integrated within their everyday activities and interactions.
Hence, customer demand for convenience acts as a catalyst, prompting businesses across various industries to embed financial services within their existing platforms and meet the evolving needs of their users. In addition, the expansion of embedded finance on a global scale, driven by financial inclusion initiatives, has the potential to transform the way people manage their finances and drive economic growth in previously untapped markets. However, regulatory challenges act as a significant restraint for the embedded finance market, as the regulatory laws involve the integration of financial services into non-financial platforms or products and blur the traditional boundaries between different sectors and raises complex regulatory issues.
Moreover, different countries have varying regulatory environments, making it difficult for businesses operating across borders to navigate the complex compliance requirements. As a result, many companies face barriers to scaling their embedded finance offerings globally, limiting the market's expansion potential. On the contrary, by integrating financial services directly into platforms, companies can automate financial processes, reducing manual intervention and associated costs. This streamlines operations, improves efficiency, and enables real-time transactions, benefiting both businesses and consumers. Hence, automation and efficiency will provide lucrative opportunity for the embedded finance market growth.
The report focuses on growth prospects, restraints, and trends of the embedded finance market analysis. The study provides Porter’s five forces analysis to understand the impact of various factors, such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers on the embedded finance industry.
The embedded finance market outlook is segmented on the basis of type, industry vertical and region. By type, it is segmented into embedded payment, embedded lending, embedded investment, and embedded insurance. By industry vertical, it is segmented into retail and e-commerce, transportation and logistics, healthcare, media and entertainment, and others. Region wise, it is analyzed across North America, Europe, Asia-Pacific, and LAMEA.
Based on type, the embedded payment segment attained the highest growth in 2022. This is attributed to the fact that embedded payments not only provide access to alternative funding sources but also simplify the buying process for customers, resulting in higher levels of satisfaction and loyalty. In addition, partnerships between non-financial platforms and payment providers or fintech companies enable access to secure, reliable, and scalable payment solutions, accelerating the adoption of embedded payments. However, the embedded lending segment is considered to be the fastest growing segment during the forecast period. This is because by presenting lending options at relevant touch points within non-lending platforms, users are exposed to lending products and encouraged to consider their lending needs. This increased awareness contributes to the growth of the embedded lending segment.
Region wise, North America attained the highest growth in 2022. This is because regulatory bodies in North America are actively considering policies and regulations to foster innovation and competition in the embedded finance space. Thus, they are aiming to strike a balance between consumer protection and enabling partnerships between financial and non-financial entities. Hence, such continuous innovation from fintech firms fuels the growth of embedded finance in the North America region. However, the Asia-Pacific region is considered to be the fastest growing region during the forecast period. This is attributed to the fact that Asia-Pacific region witnessing significant digital transformation across various sectors, including finance. Also, the increasing adoption of smartphones, internet connectivity, and digital payment platforms has created a favorable environment for embedded finance solutions. Hence, as more businesses integrate financial services into their existing platforms, the demand for embedded finance offerings has surged.
The report analyzes the profiles of key players operating in embedded finance market share such as Block, Inc., Cybrid Technology Inc, Fortis Payment Systems, LLC (“Fortis”), Finastra International Limited, FinBox, Lendflow, PAYRIX, PayPal Holdings, Inc, Stripe, and Zopa Bank Limited. These players have adopted various strategies to increase their market penetration and strengthen their position in the embedded finance industry.
Market Landscape and Trends
The embedded finance market has witnessed significant growth and transformative trends in recent years. One prominent market trend is the proliferation of embedded finance partnerships between fintech companies and various industries, such as e-commerce, healthcare, and transportation. These collaborations enable businesses to offer financial services like payments, lending, and insurance to their customers, enhancing the overall customer experience. Furthermore, another notable trend is the rise of embedded finance APIs (Application Programming Interfaces), which facilitate the integration of financial functionalities into third-party platforms. This allows developers to easily incorporate banking and payment services into their applications, reducing development time and costs. In addition, the emergence of decentralized finance (DeFi) and blockchain technology has contributed to the growth of embedded finance, enabling secure and transparent financial transactions without the need for intermediaries. Thus, the embedded finance market is poised for further expansion as more industries recognize the value of integrating financial services into their platforms, resulting in greater convenience and accessibility for consumers. Therefore, these are some of the major market trends of embedded finance market.
Top Impacting Factors
Increase in Digital Transformation
The rising trend of digital transformation in several sectors including finance is the key factor driving growth of embedded finance market, as it is revolutionizing the way financial services are delivered and consumed. Furthermore, businesses across industries strive to meet the evolving demands of customers in an increasingly digital world, they are embracing embedded finance as a means to enhance their products and services. Moreover, by integrating financial capabilities into their existing platforms, companies can offer seamless and convenient financial experiences to their customers, eliminating the need for third-party intermediaries. Thus, this transformation enables businesses to create new revenue streams, deepen customer engagement, and gain a competitive edge in the market. In addition, with the advent of advanced technologies such as cloud computing, artificial intelligence, and APIs, digital transformation provides the infrastructure and tools necessary to facilitate the integration of financial services into non-financial platforms. This convergence of industries not only benefits businesses but also empowers consumers with greater access to financial products and services, driving financial inclusion and expanding the reach of traditional financial institutions. Hence, digital transformation acts as a catalyst for the growth and success of the embedded finance market, enabling businesses to leverage the power of technology and redefine the boundaries of financial services.
Customer Demand for Convenience
As consumers increasingly prioritize seamless and hassle-free experiences, they seek out financial services integrated within their everyday activities and interactions. For instance, consider the rise of embedded payment solutions in ride-hailing apps. Thus, by allowing users to pay for their rides directly within the app, eliminating the need for separate transactions or the hassle of cash payments, these platforms cater to the convenience-driven demands of customers. Furthermore, this integration not only enhances the user experience but also promotes loyalty and engagement, thereby fueling the embedded finance market's expansion. Thus, customer demand for convenience acts as a catalyst, prompting businesses across various industries to embed financial services within their existing platforms and meet the evolving needs of their users.
Global Expansion and Financial Inclusion
As technology continues to advance and connectivity improves worldwide, traditional financial institutions are realizing the immense potential of embedding financial products and services within non-financial platforms. Therefore, by integrating financial offerings seamlessly into existing ecosystems such as e-commerce marketplaces, ride-hailing apps, or social media platforms, global expansion becomes a catalyst for the embedded finance market's growth. For instance, a leading e-commerce platform in a developing country could partner with local banks to offer customers instant access to credit facilities at checkout, empowering small businesses and individuals who are previously underserved by traditional banking systems. Thus, this symbiotic relationship between platforms and financial institutions promotes financial inclusion, as it enables previously unbanked or underbanked individuals to gain access to essential financial services and participate more actively in the digital economy. In addition, the expansion of embedded finance on a global scale, driven by financial inclusion initiatives, has the potential to transform the way people manage their finances and drive economic growth in previously untapped markets.
Regulatory challenges indeed act as a significant restraint for the embedded finance market, as embedded finance involves the integration of financial services into non-financial platforms or products and blurs the traditional boundaries between different sectors and raises complex regulatory issues. Furthermore, now-a-days governments and regulatory bodies are often concerned about consumer protection, data privacy, anti-money laundering, and fair competition in this evolving landscape. Moreover, the regulatory challenges arise due to the need to adapt existing regulations to encompass the unique features and risks associated with embedded finance. Consequently, it requires collaboration between financial institutions, technology companies, and regulators to develop new frameworks that adequately address these concerns without stifling innovation. However, this process can be time-consuming and challenging, impeding the rapid growth of the embedded finance market. In addition, different countries have varying regulatory environments, making it difficult for businesses operating across borders to navigate the complex compliance requirements. As a result, many companies face barriers to scaling their embedded finance offerings globally, limiting the market's expansion potential.
Expanded Customer Base
With the integration of financial services into non-financial platforms, such as e-commerce websites, ride-sharing apps, and social media platforms, embedded finance has the potential to reach a much larger audience than traditional financial institutions alone. Thus, by leveraging the existing user base of these platforms, embedded finance providers tap into a diverse range of customers, including those who may not have previously had access to financial services or were underserved by traditional banking systems. This expanded customer base allows embedded finance companies to capture new market segments, penetrate emerging markets, and provide tailored financial solutions to a wider range of individuals and businesses. In addition, the integration of finance into everyday platforms enhances convenience and accessibility, making financial services more seamlessly integrated into people's lives. Hence, this increased reach and accessibility ultimately contribute to the growth and expansion of the embedded finance market share.
Key Benefits for Stakeholders
- This report provides a quantitative analysis of the market segments, current trends, estimations, and dynamics of the embedded finance market forecast from 2023 to 2032 to identify the prevailing embedded finance market opportunity.
- The market research is offered along with information related to key drivers, restraints, and opportunities.
- Porter's five forces analysis highlights the potency of buyers and suppliers to enable stakeholders make profit-oriented business decisions and strengthen their supplier-buyer network.
- In-depth analysis of the embedded finance market segmentation assists to determine the prevailing market opportunities.
- Major countries in each region are mapped according to their revenue contribution to the global market.
- Market player positioning facilitates benchmarking and provides a clear understanding of the present position of the market players.
- The report includes the analysis of the regional as well as global embedded finance market trends, key players, market segments, application areas, and market growth strategies.
Embedded Finance Market Report Highlights
Market Size By 2032
USD 622.9 billion
CAGR of 25.4%
2022 - 2032
By Industry Vertical
Key Market Players
PayPal Holdings, Inc, Lendflow, Cybrid Technology Inc, Block, Inc., Finastra International Limited, Stripe, FinBox, PAYRIX, Fortis Payment Systems, LLC (“Fortis”), Zopa Bank Limited
In the embedded finance market, as technology continues to advance, it is expected to see financial services seamlessly integrated into non-financial platforms, such as e-commerce, ride-hailing, and healthcare. This integration allows consumers to access financial products and services conveniently, enhancing their overall experience. Furthermore, another important trend is the rise of open banking and API-driven ecosystems as open banking initiatives and the development of robust Application Programming Interfaces (APIs) enable seamless connectivity and data sharing between financial institutions and third-party service providers. This has helped to empower consumers to have greater control over their financial data and foster innovation in the development of new financial products and services. Moreover, as smartphone adoption and internet penetration continue to increase globally, underserved populations will also gain access to financial services for the first time through embedded finance. This has the potential to drive financial inclusion and unlock new economic opportunities, fostering growth and development in these regions. Further, the future trends of the embedded finance market include widespread adoption across industries, open banking and API-driven ecosystems, personalized offerings, expansion into emerging markets, and a strong focus on security and privacy. These trends are projected to revolutionize the way financial services are accessed, delivered, and experienced, ultimately shaping a more inclusive and convenient financial landscape.
Furthermore, market players are adopting strategies like business development for enhancing their services in the market and improving customer satisfaction. For instance, in August 2022, Parafin, Inc., an embedded finance startup in the U.S., announced that it raised $60 million through a series B funding round. The round was led by GIC, Singapore's sovereign wealth fund. The company aimed to utilize funds for introducing new products designed for small businesses. Therefore, such strategies are expected to boost the growth of the embedded finance market in the upcoming years.
Moreover, some of the key players profiled in the report are Block, Inc., Cybrid Technology Inc, Fortis Payment Systems, LLC (“Fortis”), Finastra International Limited, FinBox, Lendflow, PAYRIX, PayPal Holdings, Inc, Stripe, and Zopa Bank Limited. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.