[ Answers · Fintech ]

What is embedded finance?

By Ben Tabas, Intrica Research · Updated · US

Answer

Embedded finance is a non-bank company offering financial products such as accounts, cards, payments or loans inside its own app, while a licensed bank provides them behind the scenes. A July 31, 2024 Federal Register notice from the OCC, Federal Reserve and FDIC says these bank and fintech arrangements are sometimes called banking-as-a-service or embedded finance, and commonly cover deposits, payments and lending.

How it works

Three parties usually sit behind an embedded product. The brand owns the customer and the app. A bank holds the money and the charter. A technology layer often connects the two.

The July 31, 2024 Federal Register notice from the OCC, Federal Reserve and FDIC calls that technology layer an intermediate platform provider or middleware provider. It says fintechs often maintain the deposit and transaction system of record.

Stripe's Treasury docs, checked Oct. 28, 2026, show the model in practice. Stripe says it is not a bank, and US funds eligible for pass-through FDIC insurance are held at Fifth Third Bank.

What regulators watch

  • Reconciliation. The 2024 notice says deposit arrangements bring heightened operational complexity, including reconciliations.
  • Customer confusion about deposit insurance, which the same notice lists as a risk.
  • Records held by the middleware company. The CFPB says Synapse, a provider between fintech apps and banks, filed for chapter 11 on April 22, 2024, and partner banks found $60 million to $90 million less than Synapse's records showed.
  • Recordkeeping duties. The CFPB's complaint, filed Aug. 21, 2025, alleged Synapse failed to keep adequate records of where consumers' funds were.

What a fintech decides before launch

  1. Pick the product: deposits, cards, payments or lending.
  2. Pick the bank partner and whether a middleware provider sits between you.
  3. Decide who keeps the ledger and how often it is reconciled with the bank.
  4. Write customer disclosures that name the bank and explain deposit insurance.

See whether ChatGPT and Google AI name your company when buyers ask for embedded finance providers.

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Sources

  1. Request for Information on Bank-Fintech Arrangements Involving Banking Products and Services Distributed to Consumers and Businesses · OCC, Federal Reserve Board and FDIC (Federal Register), July 31, 2024Supports: The regulators' description of bank and fintech arrangements, the embedded finance term, middleware providers and the risks they list.
  2. Synapse Financial Technologies, Inc. · Consumer Financial Protection Bureau, Sept. 15, 2025Supports: Synapse's role, its April 22, 2024 bankruptcy, the $60 million to $90 million shortfall and the Aug. 21, 2025 complaint.
  3. Treasury · Stripe, Oct. 28, 2026Supports: Checked Oct. 28, 2026: an embedded account product where Stripe says it is not a bank and Fifth Third Bank holds eligible funds.

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General information, not legal advice.

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