COMMENTARY: How Embedded Lending Is Transforming the Payment Stack

Embedded lending is rewriting the rules of how payments work, eliminating the need for separate credit approvals and enabling built-in financing directly into digital wallets and checkout processes.

In the past year, 45% of Gen Z and Millennials used BNPL services, and these numbers are expected to rise. The global embedded-finance market is projected to grow at a 31.53% compound annual rate between 2025 and 2034. Consumers are driving this shift. Today, consumers and businesses expect instant, seamless financing exactly when and where they need it. In particular, digital wallets offer real-time and one-click financing options that match the speed and convenience users are looking for, and their popularity is rising—65% of U.S. adults have used a digital wallet at least once in the past month.

Technology development and platform evolution are other driving forces behind embedded lending. Apple, for example, now lets third-party wallets access the iPhone’s near-field communication (NFC) capabilities, opening new lending channels inside customers’ pockets. This advance fits a larger trend in which major technology platforms are integrating financial services into their environments.

The transformation of customer access points—seamlessly integrating financial services into the precise moment and place a customer needs them, whether online, in-store, or through a banking app—minimizes payment friction. Embedded lending is extending instant credit far beyond retail, unlocking new use cases from financing medical procedures to supporting business cashflow needs. By embedding lending directly into diverse touchpoints, financial institutions and fintechs are breaking down access barriers, making credit more intuitive, immediate, and relevant than ever before.

While some may view the rise of embedded lending as a battle between card-issuing banks and fintechs with BNPL products, the true competition lies elsewhere: in who best meets customer expectations and who ultimately owns the customer relationship.

Through API technology, embedded lending’s direct-to-consumer framework allows providers access to real-time customer data, enabling them to offer personalized credit solutions, dynamic risk assessment, and tailored financial products—shifting payment providers from transaction intermediaries to trusted financial partners.

However, it’s crucial to understand market-specific regulations related to embedded lending. The European Union, though stringent in its vast regulatory framework, still promotes competition under specific regulations. Meanwhile, in the U.S., regulations are also fluctuating between extremes, first with increased Consumer Financial Protection Bureau (CFPB) scrutiny and now President Trump’s administration suggesting a more lenient approach under the new administration.

While under-regulation can result in harm to consumers, overregulation risks stifling fintech innovation. The difficulty lies in creating guardrails that protect consumers while fostering creativity, allowing embedded lending to remain a driver of financial accessibility. With customer protection paramount, the future of embedded lending looks white-labeled. While fintechs have led the embedded-lending revolution, banks aren’t sitting this one out.

In this model, a fintech, retailer, or platform can provide credit options to customers without developing their own lending technology or securing regulatory approvals. Instead, they leverage a bank’s lending capabilities but present them under their own brand. By embedding their services into everyday platforms, banks scale their reach and gain deeper, real-time insights—keeping them relevant in a customer-first world.

White-labeling generates new loan-revenue streams for banks without heavy customer-acquisition costs. Instead of investing in marketing, underwriting, and direct customer engagement, banks can focus on their core business of lending.

For their clients, a white-labeling framework gives them access to best-of-breed technology and built-in Know Your Customer and Know Your Business checks to ensure regulatory compliance, as well as money-laundering and fraud detection powered by AI and machine learning. This collaboration enables a seamless, embedded, and real-time digitized lending experience.

Embedded lending has ended an arduous, one-size-fits-all approach to lending and now facilitates affordable financing options inside businesses’ and consumers’ wallets. With white-labeling, banks can claim back market share from fintechs, become modern, relevant lenders appealing to all generations, and make their existing loan programs accessible wherever the customer wants and needs them.

—Yaacov Martin is cofounder and chief executive of Jifiti.