The way startups approach financial services is undergoing a quiet revolution — and it’s being led by embedded finance. This shift isn’t just about adding payment features. It’s about rethinking how business models work, how users engage, and how platforms earn money. At its core, embedded finance is answering a demand that’s been growing for years: make financial interactions faster, simpler, and seamless.
We’ve grown used to the convenience of tapping a screen to book a ride, pay bills, or even invest. Consumers expect all this — and more — within the same app. Embedded finance delivers that by weaving financial tools directly into the digital platforms people already use. For startups, this integration has become a powerful growth lever.
Why Embedded Finance Is Booming
At the heart of this transformation is convenience. In the past, paying bills meant long queues and paperwork. Now, it’s done in seconds within the apps we rely on daily. People want to pay, borrow, invest, or even buy insurance — without ever switching platforms.
That shift has created a massive new market. Bain & Company projects that embedded finance platforms and their infrastructure providers will more than double revenue — from $21 billion in 2021 to $51 billion by 2026. And transaction volumes? They’re expected to skyrocket to $7 trillion, making up 10% of all U.S. financial activity.
Technology plays a big role here. What once took months of IT planning can now be done in days using open APIs from platforms like Stripe, Plaid, or Revolut. These tools lower the barriers for startups, reducing both costs and complexity. And more importantly, they unlock new revenue streams.
Take Shopify, for instance. While many see it as a subscription platform, nearly half its revenue now comes from embedded financial services — from loans to payments. It’s not just a feature; it’s a core part of the business model. That’s a blueprint many startups are now following.
Why Banks Are Struggling to Catch Up
While startups move fast, traditional banks are stuck playing catch-up. Most still run on aging infrastructure — in some cases, systems dating back to the 1980s. Transitioning to modern, API-based frameworks is costly and disruptive. Imagine trying to overhaul decades-old databases with tens of thousands of employees — while still maintaining compliance, security, and daily operations. It’s no small task.
Some of the biggest, tier-one banks are investing billions in this transformation. But many others, especially older or regional institutions, are lagging. They’re weighed down by legacy processes, rigid regulations, and outdated cybersecurity protocols. Some still require in-person visits for routine tasks. Others rely on systems like voice trading, which feel archaic in the age of real-time fintech.
The result? A widening gap between what customers expect and what traditional banks can deliver.
Startups Are Winning on User Experience
Consumers now expect more than just basic services. They want super apps — all-in-one platforms that blend financial and non-financial services into a single, smooth experience.
Modern apps show your balance, spending trends, exchange rates, and more — instantly. By contrast, some traditional banks still ask you to wait for an email just to get a currency conversion rate. That kind of friction is a dealbreaker for today’s users.
Startups don’t need to build everything from scratch. Through smart partnerships and fintech integrations, they can turn their platforms into financial ecosystems — offering services like credit, insurance, or investing within a single app. The key is owning the experience and keeping the user in one place. Those who do that will not only build loyalty but open new, high-margin revenue streams.
Meanwhile, those who can’t adapt will slowly fade, losing relevance, users, and ultimately, market share.
