How embedded banking works
A marketplace, an accounting tool or a payroll platform adds an account with an IBAN, a card or payouts to its own product. Its users never leave the software, and may see the name of the institution behind it only in the terms.
Three parties share the work: the brand that owns the customer, the licensed bank or e-money institution that holds the funds, and often a platform in between that supplies the ledger, the APIs and the compliance tooling.
Who holds the licence in embedded banking
Opening payment accounts, issuing e-money and issuing cards are regulated services in the EU and the UK. The brand either works under a partner's licence, typically as its agent or distributor, or obtains a licence of its own.
The partner stays answerable to its regulator for what the brand does, so the partner sets the onboarding rules, approves the marketing and monitors the transactions. Where one institution serves many brands, each brand's customer balances have to be told apart in the ledger and reconciled against the safeguarded funds.
Why companies embed banking
Software companies embed banking to earn from payments and card spending, to keep users inside the product, and to use what they already know about them, such as a seller's sales history.
The cost is taking on work that banks do: disputes, fraud, customer support on money matters, and a compliance function that the partner will audit.
Embedded banking, banking as a service or open banking?
- Banking as a service
- What the licensed side sells: accounts, cards and payments through an API. Embedded banking is what the brand's customer sees.
- Open banking
- Access, with the customer's consent, to accounts held at other institutions. Embedded banking creates new accounts inside the product.
- Embedded payments
- Only the payment step, such as a checkout inside a platform. Embedded banking adds a stored balance, accounts and cards.
Where Embedded banking shows up in a platform
Modules that do the work
- Accounts & IBANsCustomer accounts with their own IBANs, on the partner bank and the rails you choose.
- Card issuingVirtual and physical cards, wallets and controls, on the issuer processor you choose.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
- KYC / AMLIdentity checks, screening and ongoing monitoring, with the verification provider you choose.
Platforms that need it
Guides that go deeper
- How to launch a neobank without a banking licenceYour own e-money licence, an EMI's agent, a partner bank or a bank licence: how each route works, who holds the money, and what safeguarding and deposit protection cover.
- White-label vs custom fintech platform: build, rent or buyCustom build, SaaS licence or white-label with the source code: how the three routes compare on time, cost, ownership and lock-in, and the outsourcing rules regulators apply to each.
- How to launch a business account with expense cards for SMEsThe account, the cards and the controls around them: what a business account with expense cards needs, from licensed partners and KYB to SCA and the interchange rules for commercial cards.