Embedded finance – Why banks should embrace APIs and blockchain to transform banking

Embedded finance and embedded payments have been around for more than a decade, but only recently have API-first banking platforms enabled banks to deliver financial services seamlessly inside digital experiences.

Long hosted by legacy platforms, the technology often fell short of processing transactions quickly and efficiently. Today’s platforms offer a more modern, opportunistic outlook, as they can be integrated with other systems for acquiring, processing credit and debit transactions, and issuing.

More specifically, integrating financial services into nonfinancial platforms, such as e-commerce and health care, is appealing because it could improve customer experiences and streamline business operations. When payments are embedded, they’re integrated seamlessly into apps or websites. For users, it’s convenient to access and manage all their finances in one place without switching providers.

Two core technologies are driving this transformation: application programming interfaces (APIs) and blockchain.

“Embedded payments are everywhere right now,” said Troy Mann, SVP, FIS® Total Issuing™ Solutions. “They enable the expansion of product portfolios, particularly with a digital-first approach. For example, we all use different apps, and their user experiences are very intuitive. That’s being driven by modernization, having cloud-based APIs and an open ecosystem to provide those real-time experiences.”

How will embedded payments transform the commercial card space?

The global embedded finance market is estimated to reach $251.5 billion by 2029.¹This trend starts with a new way of thinking for customers, and banks must meet them where they are going: market-specific areas in the digital space.

This is where the development and integration of APIs can help. API-centric banking is a fundamental model in embedded finance. Banks showcase their products and services through APIs, enabling external platforms to integrate and embed them.

Nonfinancial companies, on the other hand, can use APIs to connect with financial service providers and embed functions like insurance into a user’s experience. In fact, 88% of organizations²are making APIs a top business and IT priority.

Some large banks even set aside nearly 14% of their IT budgets to fund API initiatives. That’s because banks see it as a way to expand visibility and reach outside the traditional financial audience. Additionally, it can reduce time to market for products, decrease spending with new product development, strengthen fintech partner relationships, and create new customer and revenue opportunities.

It’s a matter of where and how to take advantage of those opportunities.

How can banks balance the risks and rewards of embedded finance?

Embedded finance is not without risks, as banks have much to consider: the right combination of partners, resources with API development and IT teams, security frameworks, regulatory and geographical concerns, plus the impact on current and prospective customers.

Starting with the customer, what is embedded finance meant to do? Accelerate and simplify their journey with technology for when and where they need it.

Account holders are accustomed to visiting their financial institution (FI) or banking app for daily activities, such as reviewing credit card charges and making payments. Since embedded finance enables transactions outside this traditional process, the bank-customer relationship could waver, as the person would be less reliant on the bank. This means banks will have less control over the channels through which their products and services are distributed.

As competition increases with more FIs using embedded finance, certain products and services can become commodities. This means they face the challenge of differentiating their technology without lowering prices. Navigating these obstacles requires positioning themselves beyond a standard embedded payments platform, for example, offering a wider range of products or bundling multiple services with fraud prevention.

From a global perspective, the jurisdictions of partner banks can also shape how they position themselves and their reach. Cross-border payments must overcome currency-related, legal and regulatory obstacles, and there are costs associated with exchange rates and long wait times for transactions to settle.

That’s where blockchain embedded finance comes in. Not only can transactions be processed in seconds, but fees are also often lower and the network is borderless. An expedited process can improve cash flow for businesses on cross-border transactions while reducing friction for merchants and consumers.

Blockchain embedded finance also allows the use of stablecoins and decentralized financial services. Stablecoins are digital currencies that use blockchain technology to maintain a constant value, backed by real-world fiat currency such as the U.S. dollar.

Opportunities can differ per region, bank size, customer base and number of products offered. For example, banks with less than $10 billion in assets can charge higher interchange rates³on debit transactions.

Despite the benefits, businesses face regulatory uncertainties, particularly regarding the transparency and auditability of transactions.

In September 2025, one fallout in the U.S. came from the New York State Department of Financial Services (DFS), which directed banking institutions to adopt blockchain analytics tools.⁴These tools are intended to enhance their compliance and prevent illegal activities, according to New York State DFS Superintendent Adrienne A. Harris.⁵

“As traditional banking institutions expand into virtual currency activities, their compliance functions must adapt, onboarding new tools and technologies to mitigate new and different risks,” Adrienne said in the release.

Where is embedded finance headed next?

No matter where the road of embedded finance leads, it likely follows wherever customers want to go. It’s up to others to deliver those experiences using the latest technology.

“If we're doing our jobs right, there should not be a use case or problem that we cannot hope to solve on the embedded payments route,” Todd said.

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