The convergence of technology and finance is reshaping India’s financial landscape, and at the heart of this shift is embedded finance.
At its core, embedded finance brings financial services, like payments, credit, or insurance, directly into non-financial platforms. It allows users to complete transactions within everyday apps and services, whether that’s topping up a wallet in a gaming app or renewing a subscription, like Netflix, in one click.
What was once a novel convenience has now become a mainstream expectation. The pandemic accelerated this surge as consumers searched for safer, more accessible ways of managing and growing money.
This trend has continued to grow post-pandemic, as digital finance adoption gains traction across urban and rural India.
This rising adoption is set to transform financial inclusion and economic participation across India. A report by Research and Markets projected that the embedded finance industry in India is expected to grow at a CAGR of 37.8 per cent from 2024 to 2029, reaching US$34.32 billion.
In 2024, India saw a significant surge in digital-only investment accounts, with National Securities Depository Limited (NSDL) reporting a 33 per cent increase that brought the total number of dematerialised accounts to 185.3 million.
We are now at a time where embedded finance is no longer optional — fast becoming a tool for banks, fintechs and non-bank financial institutions to deliver services, particularly to the un(der)banked, to build the foundation for financial ecosystems.
Embedded into our daily lives
Each and every day, there is an aspect of embedded finance that we engage with in the form of embedded credit. This creates digital platforms, both financial and non, that eases the process of applying for and repaying loans without leaving them.
An example is equated monthly instalment (EMI) cards commonly used in the retail environment. Remember when you purchased that smartphone on Amazon and turned your payment into an EMI at the checkout? Well, you are not alone.
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A study by Home Credit India in 2024 on ‘How India Borrows’ showed that about 43 per cent of borrowers showed a preference for EMI cards when it came to shopping or borrowing money.
The insurance industry is another one benefitting from embedded finance – just think about the number of travel-related bookings that now also prompt you to purchase travel insurance for your trip at the same time.
Similarly, without leaving the platform you are engaged with, embedded investments can be made without the need for a broker or advisor. Unlike robo-investing, embedded investment products allow the consumer to take ownership of micro-investment decisions. Today, many non-financial websites, including ride-hailing apps, offer this service.
Benefits to Indian companies
Digital platform companies, particularly non-bank companies with customer-facing websites and apps, hold a natural advantage in the embedded finance sector. Years of transactional data have given them insight into consumer behaviour, allowing them to tailor financial offerings more precisely and price them more fairly.
This rich dataset opens opportunities not just for the platforms themselves, but also for financial institutions such as banks, insurers, and investment firms.
By tapping into these digital ecosystems, traditional players can access a broader pool of potential customers and diversify their revenue streams. They gain visibility into spending habits, credit usage, savings patterns, and financial health—insights that can guide everything from credit assessments to product design.
For example, a travel platform detecting increased discretionary spending could offer premium packages instead of budget deals — capitalising on embedded finance to enhance both user experience and profitability. This allows industries like insurance to benefit significantly from the easier access customers have increasingly enjoyed.
These datasets also offer a boost to companies, who can stay ahead of the competition by increasing customer acquisition, engagement, and retention, as well as repeat sales. Consumers reward companies they feel are attentive to their needs and preferences with loyalty.
This cycle translates into businesses building stronger business models, increasing customer share of wallet and improving financial performance.
Traditional banks struggle to connect with younger audiences who are increasingly turning to neobanks or digital banks for their seamless user-friendly experiences. However, by embedding their services in third-party platforms, even digitally transformed traditional banks can engage this younger demographic more effectively.
All of these developments mean the Indian financial sector has the potential to grow to be more resilient and financially sustainable, underpinning the growth of other sectors through greater liquidity, credit and investment, and benefitting the wider economy.
Benefits to Indian consumers
While the growth of digital banks has already improved access to financial services for consumers, embedded finance will take it a step further in terms of greater accessibility, convenience and relevance. This is because embedded finance can also provide customers with increased financial stability.
For one, access to a wide range of financial services improves financial literacy and inclusion. Customers who may prefer digital financial services or are unable to access traditional services will now be in a better position to save, invest and plan their finances while also securing themselves through greater insurance coverage.
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Since customers regularly interact with third-party platforms — be it an e-commerce site or a ride-hailing app – they build trust and rapport with these brands, making it simpler to venture into the realm of financial services.
Through greater access to and consumption of financial products and services, Indian consumers can become increasingly financially literate and more financially stable. This demand for financial products is soaring in a country with a rapidly growing urban and middle-class society.
Embedded finance has now filled the gap by providing access and convenience, and is set to propel India’s society, economy, and people forward.
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