Embedded Finance Explained: Benefits, Use Cases, and Trends

Embedded finance enables a seamless customer journey by including financial features like payment, lending, and insurance services into everyday applications. This blog talks about embedded finance, its advantages, use cases, and more.

What is Embedded Finance?

Embedded finance is when non-financial businesses integrate financial services within their applications, eliminating the need for customers to interact with a separate bank page or payment app. Thanks to this, customers can conveniently use financial products like loans or make payments on one platform itself.

Non-financial companies embed these financial tools on their platforms via partnerships with banks, NBFCs and financial service providers. API banking, which allows these third-party applications secure access to the bank’s services and financial data, is central to this integration. This enables businesses to give customers more value within their core offering, improving customer loyalty.

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Benefits of Embedded Finance

The rise of embedded finance delivers clear advantages for users and businesses alike:

• Instant access and convenience: Customers can access credit, make payments, or purchase insurance instantly, without navigating away from the chosen platform.

• Personalised offers: With embedded finance, providers can offer financial products tailored to customer requirements and even their spending habits.

• Improved financial inclusion: By making digital banking available through everyday platforms, more people, including those in rural or semi-urban areas, can participate in formal financial systems. This promotes broader access to credit and protection.

• Efficiency and cost savings: Businesses can reduce checkout friction, speed up internal operations, and lower costs by embedding payment, lending, and insurance processes. For users, it translates to quicker approvals and fewer steps for routine financial tasks.

• Secure customer experience: Embedded finance in India operates either in association with NBFCs or under regulatory frameworks, ensuring compliance and user safety. This safety helps to further enhance customers' purchase journeys.

Use Cases of Embedded Finance

Embedded finance has many practical applications tailored to Indian consumers and businesses:

Buy Now Pay Later

"Buy now, pay later" allows customers to break down the amount of their online purchase into easy instalments during the buying process. BNPL allows the easy use of credit instantly without much hassle, enabling customers to pay for large items more easily.

Embedded Insurance

Embedded insurance integrates protection into your purchase flow. For example, when booking an airline ticket, customers are offered trip insurance on the same page. When buying a smartphone online, they can add device protection with a click. This reduces the need for separate applications and ensures customers don’t miss important insurance protection when it matters.

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Digital Lending and Payments

Many platforms now offer quick Personal Loans, Business Loans, or working capital solutions within shopping or business management apps. Business owners can access inventory credit directly on supply chain portals or pay vendors using embedded financial services. This streamlines processes for both consumers and small-and-medium businesses.

B2B Financial Tools

For SMEs, there’s growing adoption of embedded services like invoice financing, business credit lines, and real-time expense management. These tools help manage day-to-day operations efficiently, without extra paperwork or third-party coordination.

Current Trends of Embedded Finance in India

Embedded finance is already transforming India’s financial landscape by merging convenience with inclusion. Several current trends highlight how deeply it is being integrated into daily digital and business ecosystems:

Rapid Integration Across Industries

Beyond e-commerce, sectors such as healthcare, education, and mobility are now offering embedded financial services. Patients can finance medical bills directly through health-tech apps, while ed-tech platforms allow students to access flexible loans for courses.

Widespread Use of Buy Now Pay Later

BNPL remains one of the most prominent examples of embedded finance in India. It helps consumers manage cash flow by turning large purchases into easy instalments without the complexity of traditional loans.

Expansion of Embedded Insurance

E-commerce websites, travel portals, and fintech apps now provide instant insurance coverage options within their checkout flows. Whether it’s device protection or trip cancellation insurance, users get simplified coverage at the point of need.

Strong Fintech–NBFC Partnerships

Indian fintech firms are collaborating with NBFCs and banks to launch embedded financial products that are both compliant and scalable. This ensures that credit and insurance services reach underserved markets.

Growth of API-based Finance

Open banking and API integrations are enabling faster, more secure data sharing between banks and digital platforms. This technological advancement supports real-time credit approvals, instant payments, and transparent account management.

Increasing Rural Participation

Thanks to mobile penetration and digital onboarding, rural and semi-urban populations are gaining access to financial services that were previously limited to cities. This has improved credit inclusion and helped small businesses grow through embedded lending models. In fact, by 2029, India's embedded finance revenues are projected to reach USD 28.6 billion, driven by widespread digital adoption and expansion across both urban and rural areas.

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To Conclude

Embedded finance is redefining customers' relationships to financial services by providing on-the-spot credit through buy now pay later, simplified protection, and instant access to lending. Taking place in familiar digital surroundings, it helps improve existing relationships with customers while increasing access to financial products and services. 

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FAQs

What is the role of open banking in embedded finance?

Open banking enables the secure sharing of financial data through APIs, allowing apps to provide loan, debit card, and bill pay features within a single platform.

What are examples of embedded finance in India?

Buy Now Pay Later, travel insurance during flight bookings, and branded credit cards from e-commerce platforms are some common examples of embedded finance in India.

How does embedded finance benefit non-financial companies?

It helps nonfinancial companies enhance their core offering, reduce service fees, and offer personalised value propositions by integrating essential financial services.

Can embedded finance be used for an all-inclusive holiday package?

Yes, when you book an all-inclusive holiday, you can opt for flexible payment options or add-on coverage, such as travel insurance, directly on the booking page.

How does embedded insurance add value?

Embedded coverage provides instant protection at the point of sale, eliminating the need for extra steps and ensuring convenience for users.

How does embedded finance help businesses create new revenue streams?

Embedded finance enables companies to seamlessly integrate financial features, such as lending, payments, and insurance, into their digital platforms. This allows them to earn commissions or fees from financial transactions, opening up new revenue streams without requiring them to become a licensed financial institution.

What role do financial accounts play in embedded banking?

Financial accounts enable platforms to provide users with seamless money management, such as saving, spending, or transacting, directly through the app. This is a key aspect of embedded banking, where users can manage financial tasks within their everyday digital experiences, eliminating the need for external bank apps.

Why are revenue streams important in the growth of embedded finance?

For both fintech and non-financial companies, revenue streams from embedded financial features, such as lending fees, commissions, and insurance tie-ups, support growth and innovation. This business model aligns customer satisfaction with business profitability, ensuring mutual benefit.

What is the global embedded finance market, and how is it evolving?

The global embedded finance market is experiencing rapid growth as digital platforms integrate payments, lending, and insurance into their core offerings. By 2030, the market is expected to reach $7.2 trillion in size, driven by the rising adoption of fintech, digital payments, and partnerships between banks and non-financial companies.

How do banking services fit into embedded finance?

Banking services like savings, credit, and insurance are now being integrated directly into apps and websites through APIs. This allows users to perform financial activities, such as applying for loans or paying bills, without leaving the platform, making banking more seamless and accessible.