Embedded Finance

Embedded finance means that a company whose main business is something else offers a financial product inside its own app, website or checkout. The customer sees the brand of the retailer, the software vendor or the club. The account, the card, the loan or the payment itself comes from a licensed provider that the customer rarely notices. The meaning in banking is the same from the other side: a bank sells its license and its balance sheet through someone else's front end, a model also called embedded banking.

The typical use cases fall into three groups. Embedded payments put a payment method or a wallet into a platform, for example a marketplace that pays out sellers without sending them to a separate bank. Embedded lending offers a loan or a deferred payment at the moment of purchase. Embedded accounts and cards give a non-bank brand its own account or credit card product. The Euro Banking Association, the Paris-based association of European banks, wrote a report on these models through its Open Finance Working Group, called "Navigating the path to embedded finance".

One of the largest German examples is the ADAC credit card. The ADAC, Germany's motoring club, sells the card to its members under its own name, and since September 2024 Solaris SE in Berlin has been the bank behind it, replacing Landesbank Berlin. According to Solaris, about 1.3 million contracts moved to its platform in that migration. A club member deals with the ADAC brand, while Solaris holds the banking license, runs the card program and answers to BaFin.

The same pattern shows up in German business software. Accounting and invoicing tools offer a business account or a payment link inside the program, and e-commerce platforms pay out their merchants through a partner payment institution. Card programs of retailers and fuel station networks follow the older version of the same idea. The provider side of these deals is banking as a service: platforms provide access to licensed banking services.

The brand in front usually needs no license of its own, because the regulated activity sits with its partner. A firm that provides payment services in Germany needs written BaFin authorization under section 10 of the Zahlungsdiensteaufsichtsgesetz (ZAG), and deposits and loans need a license under the Kreditwesengesetz. The contract between brand and license holder therefore decides who does the KYC checks, who handles complaints and who stops a payment when the anti-money laundering system raises an alarm.

BaFin looks at these chains from the risk side. In its focus risks it lists concentration in IT outsourcing and writes that in some areas a few specialized IT service providers serve most German credit institutions (in German). The EU's Digital Operational Resilience Act (DORA) makes a bank answer for its ICT third parties, so a bank behind an embedded finance program has to document its partners and its exit plan. For payments, Regulation (EU) 2024/886 requires every provider of SEPA credit transfers to offer instant transfers too, which gives embedded payments a rail that settles in seconds.

Embedded lending in Germany is about to face stricter consumer credit rules. The second Consumer Credit Directive, Directive (EU) 2023/2225, removes the old carve-outs for small and interest-free credit, so most buy now, pay later offers at a checkout fall under consumer credit law, as the law firm A&O Shearman explains. The rules apply from 20 November 2026. The German justice ministry published a draft law to carry the directive into German law, covered by Bird & Bird (in German).

For a shop or platform that offers deferred payment through a partner, that means credit checks, pre-contract information and the right of withdrawal apply to more of its offers. The lender behind the button carries most of the duties, while the brand in front has to show the information at the right moment in its own checkout.

Finance Loop is the meeting place for the people on both sides of an embedded finance deal: bankers who provide the license, payment and compliance staff, and the product and IT teams at fintechs and software companies. Finance Loop connects the finance, IT and AI communities in Germany, Austria and Switzerland, with events in Frankfurt, Munich, Berlin and Hamburg.

Finance Loop is a partner of Frankfurt Digital Finance, a two-day conference on finance, fintech and regulation at the Gesellschaftshaus Palmengarten. Finance Loop supported the Fintech Founder & Investor Evening in Frankfurt and covered KI Exchange 2026 of Payment & Banking in Hamburg. Finance Loop is built in collaboration with TechQuartier, where fintech meetups in Frankfurt often take place.

For a bank, embedded finance means distributing accounts, cards, payments or loans through another company's product. The bank keeps the license, the balance sheet and the regulatory duties; the partner brings the customers and the user interface. Banks that do this at scale usually run a banking as a service platform with APIs for their partners.

The ADAC credit card, issued by Solaris SE for the ADAC motoring club, is one of the largest. Others are business accounts inside accounting software, payouts to sellers on marketplaces and deferred payment at online checkouts, each run by a licensed bank or payment institution behind the brand.

Open banking is a right to access data: under PSD2 a licensed provider may read a customer's bank account or start a payment once the customer agrees. Embedded finance is a distribution model: a non-bank sells a financial product under its own brand. The two often meet, for example when an accounting tool reads bank data through open banking and offers a loan through an embedded partner. More on the data side is on the open banking in Germany page.

The bank or payment institution that provides the account, card, payment or loan needs BaFin authorization or a passported EU license. The brand in front usually works as its partner or agent and needs no license of its own, but it has to follow the contract and the compliance rules its licensed partner sets.