Why embedded finance is integral to Asia’s growth story

The convergence of digital and financial technologies is steadily reshaping how businesses and consumers interact with financial products and services.

As digital payments and smartphone apps become increasingly widespread, non-financial businesses are increasingly integrating financial services into the customer experience.

Embedded finance, which provides easy access to financial services such as electronic payments, credit or insurance, is more than a tech upgrade. It is a new paradigm for financial delivery.

Licensed banks are tapping new revenue streams by leveraging their regulated infrastructure to offer Banking-as-a-Service (BaaS) to non-financial businesses, taking advantage of application programming interfaces (APIs) and advanced financial messaging standards to provide a seamless digital service.

Fintechs are partnering with consumer brands to integrate payments and data in new ways, such as API-driven settlements that allow consumers to make digital transactions directly within a brand’s app or product page, while analysing transaction data for buy-now-pay-later (BNPL) loans or tailored loyalty programs that can further incentivise retail sales.

Embedded finance is about more than processing digital transactions. Its impact extends across industries.

Airlines, hotels, tour operators and even micro businesses like travel influencers can now embed insurance offers into travel packages or checkout processes, creating unified customer journeys while generating additional revenue.

Similarly, universities and e-learning platforms can insert student loan options into course registrations for one-click financing, potentially expanding educational access.

That makes the sector’s growth potential considerable. According to a study by EY, the global market for embedded finance could reach USD606 billion in 2025, up from USD264 billion only three years ago. Asia-Pacific (APAC) accounts for about half of that market.¹

The growth of embedded finance is especially strong in Asia, where tech-savvy consumers have been enthusiastic adopters of electronic payments and digital financial services. In 2023, more than 50% of all payments at retail points of sale (POS) were made using digital wallets, according to Worldpay’s latest global payments survey, with a total transaction value of over USD7.8 trillion.²

As a case in point, Southeast Asian e-commerce platform Lazada uses embedded finance to integrate digital wallets for consumers across its websites. The feature gives shoppers BNPL options and lets them take advantage of loyalty point spending.

In the business-to-business (B2B) world, embedded finance can help support entire supply chains.

HSBC’s APIs empower e-commerce platforms to embed digital financial services in checkout pages, enabling them to offer extended payment terms to their own customers within their online platforms.

APIs are also at the heart of our collaboration with Dowsure, which helps Amazon merchants in Hong Kong and mainland China access trade finance from HSBC through a data-driven credit assessment process.³ The partnership leverages transaction data, such as inventory, sales and refund records to streamline trade finance applications without requiring further financial statements or collateral. And it all happens behind the scenes, quickly, without reams of paperwork or approval signatures.

Electronic payments, which enable quick and secure money transfers on e-commerce platforms or at physical checkouts, are at the heart of embedded finance. Devices like smartphones, computers, or physical cards with near-field communications (NFC) capabilities can all process digital transactions as simply as cash.

In addition to speed and convenience, digital payments have become a gateway for millions of unbanked and underbanked individuals to access financial services.

The potential for further growth is significant. UnaFinancial forecasts that mobile fintech adoption in Southeast Asia could reach 60% by 2030, up from 49% in 2024.⁴ This presents an opportunity for regional businesses to expand their reach and offer a range of financial services – even if these services are not core to their business.

Small businesses, in particular, stand to benefit from the growth of embedded finance. Implementation of digital and embedded finance tools has been shown to raise earnings for micro, small and medium-sized enterprises (MSMEs) significantly, particularly in emerging markets – by as much as 60% to 100%.⁵

In Indonesia, for example, fintech start-up Finfra enables non-financial companies and offline businesses to integrate white-labelled lending services into their offerings.⁶ This can help wholesalers integrate lending into their services to extend the buying power and earnings potential of their MSME clients. Similarly, in India, digital banking platform CredAble connects MSMEs to working capital through services like supply chain financing and invoice discounting.⁷

Behind the scenes, embedded finance is transforming how consumers access digital financial services and how businesses deliver them.

As non-financial companies increasingly integrate financial products directly into their operations, they not only enhance the customer experience but also unlock new revenue streams and growth opportunities. The digitalisation of finance, driven by technologies such as cloud computing, APIs, and mobile platforms, has made financial services more accessible and customisable than ever before.

This quiet revolution towards invisible, interconnected customer experiences is particularly powerful in Asia, where the rapid adoption of digital commerce has transformed the way businesses and consumers interact. As embedded finance continues to evolve, it also promises to bring financial solutions to a broader audience, promoting financial inclusion and fostering economic development worldwide.