Opening Address: The Growing Hunger for Embedded Finance?
Tom Dahlström (S-Bank) & Jani Ristimäki (Bearing Point)
Embedded finance integrates financial services into non-financial platforms, creating new monetization and customer engagement opportunities beyond traditional banking. Driven by business benefits rather than regulation, it disrupts incumbents by decoupling distribution and production, shifting customer relationships toward diverse partners. Growth accelerates across consumer, SME, and simpler insurance products, though complex corporate and wealth segments lag. Traditional financial institutions face strategic choices: defend, selectively engage as distributors, or innovate capabilities vital for competitive agility, including lean products, data control, simplified offerings, and personalized proactive customer engagement to withstand fintech competition.
"Embedded finance is transforming financial services by decoupling value chains and introducing new partners, creating growth opportunities but also fragmenting traditional customer relationships. Understanding and strategizing around it is critical for future success."
Summary
- Embedded finance integrates financial services into non-financial contexts, driven by business benefits rather than regulation like open banking. - It disrupts traditional financial value chains, with new partners reshaping how financial services are produced and consumed. - Digital platforms gain new revenue streams; fintechs use embedded finance as an efficient market entry, while traditional institutions face complexity and fragmentation. - Embedded finance is rapidly expanding beyond consumer payments into insurance, SME banking, and more, though complex products like corporate banking remain challenging. - Traditional financial institutions must develop clear strategies, focusing on lean tech, data control, product simplification, and improved customer engagement to stay competitive.
Article
Banking without banks: How embedded finance is reshaping financial services
Industry leaders warn traditional institutions must adapt or risk losing relevance in fragmented market
The financial services industry is on the cusp of a fundamental transformation driven by embedded finance, according to experts speaking at the Nordic Fintech Summit in May 2025. The opening address, delivered by Tom Dahlström of S-Bank and Jani Ristimäki of Bearing Point, painted a picture of an industry where financial services are increasingly integrated into non-financial platforms, potentially sidelining traditional banks.
"Embedded finance extends beyond what open banking aimed for," explained Ristimäki to the audience of fintech professionals and banking executives. "While open banking focused primarily on payments, embedded finance brings lending, savings, investments, and insurance into non-financial contexts – with a decidedly more commercial perspective."
Beyond regulation: The business-driven transformation
Unlike open banking initiatives, which were largely driven by regulatory frameworks such as PSD2, embedded finance is primarily motivated by business benefits and commercial opportunities. This distinction has profound implications for how quickly and extensively these changes are spreading through the financial ecosystem.
"Open banking and open finance are driven by regulation, whereas embedded finance is primarily motivated by business benefits," Ristimäki noted. This market-driven approach has accelerated adoption, with both speakers highlighting how the phenomenon is expanding beyond consumer payments into areas such as SME banking services and simpler insurance products.
Dahlström emphasized the varying strategic questions facing different players in the embedded finance value chain. "Digital platforms are clear beneficiaries, gaining access to new revenue streams and improving their value proposition towards their own customers," he said. "For fintechs without large existing customer bases, embedded finance provides an efficient market entry method."
Traditional banks face existential challenges
The outlook appears considerably more complex for established financial institutions. Embedded finance fundamentally decouples the financial services value chain, disrupting the traditional model where banks controlled both production and distribution of their services.
"This fragments customer relationships, potentially reducing revenue per customer – which is challenging given the high fixed costs of traditional institutions," Dahlström warned. "It also complicates data gathering and increases operational risks, making it a more complex business overall."
Despite these challenges, the speakers stressed that traditional financial institutions continue to serve crucial roles in the embedded finance ecosystem, bringing "financial strength, credibility, trust, and security" that newer market entrants often lack.
Accelerating growth and shifting landscapes
The pace of change is accelerating, according to both presenters. While embedded finance has technically existed for some time, recent technological developments – particularly APIs, cloud computing, and end-to-end automated processes – have dramatically expanded its reach and impact.
"It started in the consumer space through big e-commerce platforms and ride-hailing apps," explained Dahlström. "In recent years, it has spread across many types of platforms and moved into more product areas, including simpler insurance products and B2B services."
However, the presenters noted that more complex financial products – corporate loans, sophisticated insurance, and wealth management – present greater challenges for the embedded finance model due to regulatory hurdles and the nature of such transactions.
Strategic imperatives for survival
For traditional financial institutions, the message was clear: develop a thorough understanding of embedded finance and form a clear strategy – whether to engage with it or not – as it will significantly impact their business regardless.
"Most traditional players will either adopt a 'wait and see' approach with defensive measures to protect existing customer relationships, or use embedded finance as a complementary sales channel for their best-performing products," Ristimäki suggested.
The speakers outlined several "no regret" investment areas that financial institutions should prioritize regardless of their chosen strategy: ensuring lean core products and processes, extracting value from data more effectively, simplifying product offerings, and significantly upgrading customer engagement approaches.
"At the moment, traditional institutions often interact with customers impersonally and reactively," Dahlström concluded. "This approach will become increasingly detrimental in the future."
As the Nordic Fintech Summit continued, the stark warning from the opening address resonated through subsequent discussions: the hunger for embedded finance is growing, and traditional financial institutions that fail to adapt risk being consumed by the very trend they once dismissed.
Part of Nordic Fintech Summit