Embedded finance: Why banks should embrace APIs and blockchain to stay competitive

One app to rule them all. Or one app to pay them all — your expenses that is. In the payments world, this used to be a pipe dream. With embedded finance, paying for a rideshare, mortgage or loan can now be done in one app or website.

Embedded finance has been around for more than a decade, but only recently became commonplace for banks, merchants and customers.

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

More specifically, integrating financial services into non-financial platforms — such as e-commerce and healthcare — is appealing because it could improve customer experiences and streamline business operations.

When payments are embedded, they’re integrated seamlessly into apps or websites. So for users, it’s the convenience to access and manage all finances in one place, without switching providers.

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

“Embedded payments are everywhere right now,” said Troy Mann, Senior Vice President, Issuer Product Group, TSYS. “They enable the expansion of product portfolios, particularly with a digital-first approach. For example, we all use different apps, and the user experiences around them are very intuitive. That’s being driven by modernization, having cloud-based APIs and an open ecosystem to provide those real-time experiences.”

Breaking away from a traditional model and approach

The global embedded finance market is estimated to reach $251.5 billion by 2029.

That trend starts with a new way of customer thinking. 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.

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

Some large banks even set aside nearly 14% of their IT budgets to 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 spend 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.

“We’re seeing a ton of embedded payments use cases,” said Todd King, Vice President of B2B Solutions, TSYS. “When it comes to the digital transformation journey in our industry, at the end of the day the focus will be embedded, instant and mobile — embedded payments will revolutionize the commercial card space by making payments more convenient, efficient and secure.”

Global choices and tradeoffs

Embedded finance is not without risks.

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 familiar with going to their financial institution (FI) or banking app for daily activities such as reviewing credit card charges and making payments. Since embedded finance allows them to make transactions outside of this traditional process, the bank-customer relationship could waver since the person would not be as reliant on them.

This means banks will have less control of the channels for 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 how to differentiate 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, jurisdictions of partner banks can also play a role in how they position themselves and their reach.

Cross-border payments must overcome currency-related, legal and regulatory obstacles. There are also costs with exchange rates and long wait times for transactions to settle.

That’s where blockchain embedded finance comes in.

Not only can transactions process in seconds, fees are 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 rates on debit transactions.

Despite the benefits, businesses face regulatory uncertainties, particularly with transparent and auditable records 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. These tools are intended to enhance their compliance and prevent illegal activities, according to New York State DFS Superintendent Adrienne A. Harris.

“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,” Harris said in the release.

An uncertain path ahead

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,” King said.

For more on embedded finance, read Part 2 of this blog series coming soon.