From e-commerce apps offering instant loans to ride-hailing platforms enabling savings wallets, Embedded Finance and Banking-as-a-Service (BaaS) are reshaping how financial products are delivered and consumed. As businesses outside the traditional banking system integrate services like credit, insurance, and payments directly into their apps, BFSI institutions are partnering with tech platforms to reach new users at lower costs. This article explores the rise of embedded finance, the BaaS architecture powering it, key players, regulatory evolution, and the broader implications for India’s financial ecosystem.
Background and Context
The concept of embedded finance involves seamlessly integrating financial services into non-financial digital platforms, such as e-commerce sites, food delivery apps, travel portals, and edtech platforms. These services—like buy-now-pay-later (BNPL), embedded insurance, and merchant credit—are enabled by Banking-as-a-Service, a backend infrastructure model where regulated banks expose APIs to third-party platforms.
In India, the embedded finance market is projected to reach $45 billion by 2030, growing at over 30% CAGR, according to a 2025 report by PwC India. Leading platforms like Amazon, Flipkart, Ola, and Zomato are already embedding credit, UPI payments, and even co-branded cards into their user journeys.
How Embedded Finance Works
Banking-as-a-Service (BaaS) Layer
Traditional banks and licensed NBFCs expose APIs for core banking functions—such as KYC, account creation, credit scoring, disbursement, and compliance.
Third-Party Platforms
E-commerce, logistics, and other tech startups use these APIs to embed financial services directly into their app workflows—without becoming banks themselves.
Consumer Experience
End-users access credit, insurance, or savings accounts within non-banking apps, removing the need to visit separate banking platforms.
Popular Embedded Finance Use Cases in India
E-commerce Financing: Flipkart, Amazon, and Myntra offer embedded BNPL and instant credit options during checkout, powered by partners like IDFC FIRST Bank and ZestMoney.
Mobility Credit: Ola and Uber integrate fuel loans, daily driver payouts, and insurance into driver apps via tie-ups with banks like Axis Bank and Avail Finance.
Edtech Loans: Platforms like Byju’s and UpGrad embed education loans for students, in partnership with fintech lenders and NBFCs.
Embedded Insurance: Travel and health insurance is embedded into platforms like MakeMyTrip and Practo, enabling frictionless coverage at the point of need.
Industry Collaboration and Key Players
Banks/NBFCs offering BaaS:
ICICI Bank
Axis Bank
SBM Bank India
Yes Bank
Liquiloans (NBFC)
Northern Arc Capital
Fintech BaaS providers:
Setu (now part of Pine Labs)
Decentro
M2P
Zwitch by Open
YAP
These players provide KYC, lending, payments, and compliance APIs for seamless fintech integration.
“Embedded finance is democratizing credit and savings by placing it where users already are—on digital platforms,” says Sanjeev Sharma, CEO of a BaaS provider.
Regulatory Environment and Compliance Concerns
The RBI has not released standalone BaaS guidelines but has emphasized:
Only licensed banks and NBFCs can extend credit
Digital Lending Guidelines (2022, revised 2024) apply to embedded lending as well
Loan disbursement must flow directly from lender to customer
LSPs (Lending Service Providers) must disclose all terms and fees transparently
The Digital Personal Data Protection (DPDP) Act, 2023 mandates platforms to obtain explicit user consent for data sharing and usage across embedded services.
Expert Perspectives
Shalini Mehra, Head of Digital Banking at a major private bank:
“Embedded finance enables hyper-contextual offerings—credit at checkout, insurance during travel booking. But it must evolve responsibly, especially with data sharing.”
Arvind Rathi, Product Head at an e-commerce unicorn:
“We saw a 32% increase in cart conversions after embedding BNPL. It’s about offering relevant financial touchpoints, not just upselling.”
Nikhil Vora, Fintech Policy Analyst:
“The RBI is watching BaaS closely. As these layers grow, ensuring regulatory compliance, liability ownership, and data security will be key.”
Social Media Reactions from Industry Leaders
@FintechPulseIN:
“BaaS is the engine behind embedded finance. Platforms offering credit, wallets, or insurance without banking licenses—powered by APIs. #FintechIndia #BaaS”
@RBIObserver:
“RBI’s digital lending norms cover embedded loans too. Platforms must disclose all charges, or face penalties. #ConsumerProtection”
@TechFinVoice:
“Embedded finance is invisible banking. It’s where payments, credit, and insurance meet user context—seamlessly. #FutureOfFinance”
Challenges and Risks
Regulatory Ambiguity:
Lack of clear BaaS-specific regulation may cause confusion over liability and compliance, especially during loan defaults or data breaches.Platform Dependency on Banks:
Non-fintech companies depend on banking partners for infrastructure and licensing, which may create bottlenecks during scale-up.User Trust and Data Privacy:
With financial services embedded in unfamiliar platforms, users may be unaware of who is storing or using their data.Profitability for Platforms:
Embedded finance works best at scale. For smaller platforms, unit economics remain a concern without sufficient transaction volumes.
Future Outlook
The embedded finance trend is expected to accelerate, especially with India’s Account Aggregator (AA) framework and Open Credit Enablement Network (OCEN) supporting consent-based credit delivery via any platform.
Analysts predict that by 2030, over 35% of all consumer loans in India may be disbursed through embedded finance channels. B2B use cases—like embedded working capital loans for MSMEs—are also emerging.
Conclusion
Embedded finance and BaaS are redefining distribution in financial services, moving the bank from branch to browser. As regulators lay down guardrails and platforms scale responsibly, India’s fintech stack may evolve into one where every business becomes a financial services enabler. The challenge now lies in governing innovation while enabling access, as embedded finance becomes the invisible infrastructure powering digital India.
