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What is Embedded Finance?

December 18, 2019
Embedded finance is an emerging model that describes two recent trends: 1. Finance is catching up to other sectors and becoming more internet-enabled, and 2. Other sectors are becoming more finance-enabled, with financial functions, such as payments, embedded directly into their platforms.


As explained in a recent white paper published by Anthemis, a global venture investment firm specializing in fintech, embedded finance is the “future state of financial services as embedded, augmented and ubiquitous”:


Financial services is the nervous system of our economy; a critical system that needs to operate efficiently and equitably for our society to function. The legacy 20th century business models in finance have become increasingly obsolete and most have not adapted to the fundamental paradigm shift—technological, institutional and societal—ushered in by our continuing transition from an Industrial Age to an emerging Information Age. It is essential that these business models be transformed in order to serve the needs of 21st century economies. There is an enormous, multi-decade opportunity to reimagine and rebuild financial services. We can create a system that is more efficient, more equitable and more resilient—and, therefore, better able to adapt to an ever-changing economy and society.


At Anthemis we see this future state of financial services as embedded, augmented and ubiquitous. Rather than finance being discrete, we see it becoming an intimate part of the products and services that drive our economies—an often invisible but critical societal infrastructure, similar to today’s communications or energy infrastructures. We imagine a world where finance is embedded deep inside the workings of our businesses and economies, powering the lives and progress of citizens and businesses rather than being a service consumed independently.


Instead of financial services being yet another sector that becomes internet-enabled, it will allow all sectors to become “financeenabled.” The result is not just finance on the internet, but rather the “Internet of Finance.”


At Tearsheet’s Embedded Conference 2019 in New York City, industry leaders gathered to discuss the future of embedded finance. One of the main takeaways from the conference was that embedded financial services will require better customer experiences, and that trust and data are the new currency that will drive that.


Payfone’s digital identity authentication services enable companies to capture the growth opportunities presented by embedded finance by enabling better and more secure digital customer experiences and higher pass rates.


Additional resources:
Embedded Finance: The future of the economy (white paper)
The investment case for Embedded Finance