Embedded finance was the defining trend of the second wave of fintech. The idea was elegantly simple: instead of requiring users to go to a bank for financial services, bring financial services to wherever users already are. Shopify offers lending to its merchants. Uber provides instant earnings access to its drivers. Every major software platform now has some form of embedded payments, lending, or insurance. The market has grown from a niche concept to an estimated $138 billion in revenue, and it is projected to more than triple over the next five years.
What most embedded finance platforms have in common, however, is that they are still built on traditional financial rails. The lending is funded by banks through warehouse facilities. The payments route through card networks or ACH. The insurance is underwritten by licensed carriers through fronting arrangements. Each of these dependencies adds cost, introduces latency, and limits the geographic reach of the product. A platform that wants to offer embedded payments to merchants in thirty countries needs banking relationships in thirty countries, each with its own regulatory requirements and integration timelines.
Crypto infrastructure eliminates many of these constraints. Stablecoin-based payment rails work globally by default. On-chain lending protocols can provide capital without bank partnerships. Smart contract-based insurance can pay claims automatically based on oracle-verified events. The end user never needs to know that blockchain technology is involved; they experience a seamless financial product embedded in the platform they already use. But under the hood, the infrastructure is faster, cheaper, and more composable than anything built on legacy rails. We believe this convergence will produce the next generation of embedded finance platforms, and we are actively investing in founders who see this opportunity clearly.
