How does embedded finance work?

Many financial products can only be offered by licensed financial institutions. As such, embedded finance typically requires that the non-financial-services company partner with a bank or other licensed financial institution. Many choose to do so with the help of a banking-as-a-service platform.

Once the connection between the tech company and the financial-service provider has been established, embedded financial products are generally managed via API. An API is a digital connection that enables communication between different websites and databases. (article continues below)

Embedded financial products are typically offered under the brand name of the non-financial company rather than the financial-services provider. For example, although the Lyft Direct debit card is issued by Stride Bank, Strides’ branding does not appear prominently on the card. This arrangement is also known as “white label” (or, in the world of cards, as a “co-branded card”).