How Should You Strategically Approach the Risks and Opportunities Presented by Embedded Finance?
Tom Dahlström (S-Bank), Jani Ristimäki (Bearing Point), Taru Möller (Nordea) & Jarkko Mäensivu (Saldo Bank)
Traditional financial institutions recognize embedded finance as a significant growth opportunity offering seamless, customer-centric experiences beyond native interfaces, yet face complexities in risk-sharing, data governance, and cultural adaptation. Success hinges on a clear customer-driven strategy, robust risk and data management, and entrepreneurial openness to innovation and partnership. Regulatory frameworks like FIDA and open finance enhance data access and personalization but increase operational risks requiring rigorous control. Embedded finance's expansion into B2B, particularly merchant payments linked to credit solutions, promises economic growth and financial inclusion, especially for underserved segments.
"Embedded banking provides customers a seamless, invisible experience focused on what truly matters. Success starts with understanding customer pains, managing risks, leveraging strengths, and embracing an entrepreneurial mindset open to testing, learning, and taking risks."
Summary
- Traditional financial institutions see embedded finance as a distribution opportunity but stress the need for friction to enable informed customer decisions. - Banks are progressively prepared technically and operationally, with cultural shifts needed to adjust business models and customer relationships. - Open finance and regulations like FIDA enhance data access, enabling better credit decisions, personalization, and AI-driven services but require responsible data governance. - Key risks include complex liability sharing, data security, KYC/AML compliance, and managing costs from multiple data sources in partnerships. - Success factors include clear customer pain points, strong data risk management, entrepreneurial mindset, and enabling SME growth to drive economic growth through embedded finance.
Article
Banking beyond boundaries: how embedded finance is reshaping financial services
Industry leaders at Nordic Fintech Summit debate the benefits and pitfalls of financial services that disappear into the background
The financial world is undergoing a quiet revolution, one where banking services dissolve into everyday experiences rather than remaining standalone activities. At last week's Nordic Fintech Summit in Helsinki, industry leaders gathered to dissect this phenomenon – known as embedded finance – and its far-reaching implications for customers, financial institutions, and the broader economy.
The panel session, titled "How Should You Strategically Approach the Risks and Opportunities Presented by Embedded Finance?" brought together Tom Dahlström from S-Bank, Jani Ristimäki from Bearing Point, Taru Möller from Nordea, and Jarkko Mäensivu from Saldo Bank. Their discussion revealed how traditional financial institutions are navigating this transformative trend while managing associated risks.
The invisible revolution in banking
Embedded finance represents a fundamental shift in how people interact with financial services. Rather than requiring customers to visit banking applications or websites, financial functions are integrated directly into other experiences – whether purchasing a car, managing a small business, or shopping online.
"For customers, embedded banking provides a seamless, invisible experience that focuses on what matters," explained Taru Möller from Nordea. "We, as banks, want to be part of those journeys, expand our distribution footprint through embedded finance, and ensure that customer experiences happen in places relevant to them—not just our native interfaces."
However, Möller also stressed the need for "positive friction" to ensure customers can still make informed financial decisions, illustrating the delicate balance institutions must strike between convenience and consumer protection.
Data: the double-edged sword
The discussion repeatedly returned to data as both the greatest enabler and risk factor in embedded finance ecosystems. With the Financial Data Access regulation (FIDA) and other open finance initiatives expanding access to financial data, institutions see tremendous opportunities for enhanced service personalization.
"The more data sources available, the better we can make sustainable credit decisions," said Jarkko Mäensivu of Saldo Bank, whose company requires full open banking data for consumer lending. "Any progress in making data more accessible, whether via APIs or other solutions, is good for us."
Yet this increased data sharing brings heightened responsibility. Mäensivu emphasized that "as a bank, we remain responsible for the data. Open finance is about sharing data, which enables more personalized journeys. FIDA, specifically, is about providing customers control over what data they share, which helps build trust."
Managing complexity and risk in multi-party ecosystems
As financial services become embedded in third-party platforms, complexity increases exponentially. This creates new challenges around liability, regulatory compliance, and operational oversight.
"In the embedded banking economy, especially with specialty platforms, things become more complex as the number of parties increases," noted Möller. "This complexity makes risk sharing and tracking liability more difficult, slowing processes and raising concerns for banks like ours."
The panel identified data security, KYC/AML compliance, and clear liability frameworks as critical risk areas. Mäensivu highlighted that "when critical parts of a process are outsourced, as a bank we treat it as critical outsourcing and ensure the process is well documented and secure."
Beyond consumer applications: embedded finance for business growth
While consumer applications have dominated the embedded finance conversation to date, the panel identified significant untapped potential in the B2B space. Particularly promising is the combination of payment services with credit and liquidity solutions for small and medium enterprises.
"If embedded finance means SMEs can open accounts, get lending, and access solutions that solve their pain points, then we've succeeded," said Mäensivu. "If embedded finance enables more SMEs to be born and to grow, it drives real economic growth—something the world needs right now."
Möller concurred, adding that "while the consumer use cases are currently dominant, innovation is coming to the B2B space—addressing small business challenges like timely advice, proper financing, and future investment protection."
Cultural shift required for traditional institutions
For established banks, the journey toward embedded finance requires not just technical capabilities but a profound cultural transformation. Traditional institutions must adapt their business models and relationship paradigms to remain relevant.
"The bigger journey is cultural: it changes our business logic and relationship models," Möller acknowledged. "We need to accept that parts of the customer relationship might now happen elsewhere and adapt to continue being relevant."
This cultural shift extends to embracing a more entrepreneurial approach to innovation. "Even as an incumbent, banks need a more open-minded, entrepreneurial approach," Möller advised. "Be open to new entrants, experiment, accept some failures, and learn from them."
The road ahead: balancing innovation with responsibility
As the session concluded, the panelists converged on several key success factors for institutions navigating embedded finance: developing a clear customer-centric strategy, establishing robust risk and data management frameworks, and cultivating an experimental mindset.
They also emphasized embedded finance's potential for financial inclusion, particularly for underserved segments previously excluded from traditional banking services – a benefit that extends beyond business considerations to broader social impact.
While the embedded finance revolution promises more seamless, contextual financial services, the industry leaders at the Nordic Fintech Summit made clear that success will depend on finding the right balance between innovation and responsibility – ensuring that as financial services fade into the background of daily life, the principles of trust, security and customer protection remain firmly in the foreground.
Part of Nordic Fintech Summit