The financial services industry is at an inflection point. Embedded finance is reshaping how businesses interact with money, seamlessly integrating financial tools directly into everyday digital experiences. Startups and fintechs have capitalized on this shift by embedding payments, lending, investing, and other financial services solutions directly into the software and technology platforms that people use every day.
Now, traditional banks stand at a crossroads: evolve and embrace this transformation, or risk being outpaced by more nimble, tech-driven competition. A threat so serious, that it is only outweighed by the opportunity it presents. By leveraging their trust, depth of expertise, and scale, banks can reclaim leadership in this new era of financial innovation.
Embedded Finance is Essential
Simply put, embedded banking makes it easier and faster for businesses to manage and move money by integrating financial services into the tools and platforms they already use day-to-day. It is a market that is forecasted to grow to over $600 billion by 2030, and yet, many banks still see it as a threat rather than an opportunity.
The path forward is clear: technology is fundamentally transforming how businesses operate and consume financial services. For banks willing to embrace innovation across both front-end experiences and back-end infrastructure, this shift represents a tremendous opportunity. As the world becomes increasingly software-enabled, technologies like machine learning and artificial intelligence are redefining how banks deliver value. Staying competitive means meeting customers where they are, with seamless, tech-enabled financial services experiences that align with their evolving expectations.
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Why Legacy Still Matters
What traditional banks bring to the table—long-term customer trust, deep domain expertise, risk management, and access to capital—cannot be easily replicated. These legacy strengths are not obstacles to innovation; they are strategic differentiators.
The most successful embedded finance models recognize the power of collaborations between banks and fintechs. This is not just about collaboration—it is strategic symbiosis that combines complementary strengths to create solutions neither could achieve alone. Fintechs bring agility, speed, and innovation. Banks contribute scale, stability, and credibility. Together, they can co-create integrated solutions that meet customers where they are, without compromising safety or compliance. The result is a better customer experience, from buying a new product to onboarding to day-to-day servicing.
At KeyBank, we have been investing in collaborations with fintech companies for over a decade and have seen firsthand how these collaborations can unlock value for all parties, most notably, the end customer. By joining forces with fintechs, banks can deliver more personalized, predictive, secure and frictionless experiences for customers.
Competing and Winning
To thrive in the era of embedded banking, traditional banks must reimagine their approach. That means thinking differently about talent, refining criteria for success, engaging more deeply with the fintech ecosystem, and building strategies that allow for flexibility based on customer needs and ever-changing market conditions.
A practical framework for banks as they assess how to bring a solution to market includes analyzing whether to build, partner, or buy.
Build: When there is an ability to obtain scale, particularly in core capabilities that can be leveraged across a wide range of customer segments and use cases (e.g., API’s, core banking services, digital capabilities, etc.). It is important that there is the discipline and appetite to not only invest capital up-front, but ongoing.
Partner: In cases where fintech’s offer deep domain knowledge, industry specialization, or superior technology, collaboration becomes the most effective path. Scale can be “augmented” by leveraging the infrastructure of the fintech. Collaborations and legal partnerships can take many forms, whether they entail integrating customer-facing platforms or embedding fintech capabilities into existing bank offerings. Long-term sustainable partnerships are not easy to execute but when done right, can be very valuable for all.
Buy: When partnerships mature and show long-term strategic alignment, an acquisition may be appropriate. Benefits might include direct control of the product roadmap, ownership of proprietary technology, and the ability to acquire talent into the bank.
At Key, we have successfully pursued all three avenues for well over a decade. For instance, we have built a suite of APIs for software companies to enable payments, partnered with fintechs to deliver workflow automation solutions to our customers, and acquired firms (e.g., XUP) to accelerate innovation.
This adaptive approach allows banks to remain competitive in a fast-evolving landscape, integrate into the platforms that customers already know and use, and continuously evolve alongside them.
Putting Embedded Finance into Practice
Across the industry, banks are moving beyond exploration. Many banks are actively embedding finance into their innovation strategies. This means modernizing payment systems, digitizing the banking experience, and forging strategic partnerships that accelerate value creation for the customer.
For example, our real-time payment (RTP) integrations give customers faster, more flexible ways to move money. Also, by collaborating with fintechs, we can scale digital solutions without reinventing the wheel, delivering value more quickly and efficiently to the customer.
Success in embedded finance is increasingly measured not by the pace of technology rollouts, but by tangible business outcomes: greater customer satisfaction, improved operational efficiency, better risk management, and stronger responsiveness to market demands.
Shaping the Future of Banking
Embedded finance is not just reshaping how financial services are delivered—it is redefining who delivers them. For traditional banks, the opportunity lies in embracing change, forging strategic partnerships, and leveraging the resulting foundational strengths to scale innovation.
The most forward-looking banks are those that continuously align with entrepreneurial leaders, investors in fintech, and market disruptors, all while staying grounded in the rigor of risk management, expertise, and scale. Not every partnership is built to last, but every collaboration brings valuable insight. Some fintechs grow, some consolidate, and others struggle to scale. The key is to learn and understand what works, what doesn’t, and how to use that knowledge to evolve, refine strategy, and build resilience. It is important to partner with fintechs that are early-stage enough to offer differentiated value, yet mature enough to scale effectively.
These experiences sharpen foresight and help banks remain agile in a dynamic market. The future belongs to those willing to think differently by experimenting, iterating on ideas, and co-creating the financial ecosystems of tomorrow, always starting, and ending with the customer. The time to lead is now—and the opportunity has never been greater.
Disclaimer:
Content provided for informational and educational purposes only and is in no way to be construed as financial, investment, or legal advice. We cannot and do not guarantee their applicability or accuracy in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal financial issues. KeyBank Member FDIC.© KeyCorp 2025 CFMA #250616-3283178.
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