It would not have been possible back then to buy insurance instantly through your mobile phone or now receive instant credit through an e-commerce platform. Embedded finance is something that truly comes from a very niche concept, and is becoming the standard in Southeast Asia’s digital economy.
We can see that today, financial services are slowly becoming invisible, but not in their function, but in terms of their entire form. It is deeply integrated into multiple apps, which we are currently using daily, from ride-hailing to online shopping.
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So, what is the next breakthrough? Finance-as-a-service (FaaS) platforms that connect straight into businesses, making banks more flexible and money much more mobile.
How is embedded finance reshaping Southeast Asia’s digital economy?
At the centre of embedded finance, there is a simple shift, which is instead of users going to the bank, which is what we have been doing for the longest time, the bank comes to the user, wherever they are.
For example, this can be in many types of transactions, Shopee offering instalment payments or even a logistics service providing driver insurance at onboarding. We can say surely that embedded finance is becoming the “new main entrance” for many of these financial services, especially in a region where 70 per cent of its adult population is unbanked or underbanked.
On the other hand, for startups and SMEs, FaaS platforms are making it easier for them to launch financial services with just a few lines of application programming interface (API) code. This can vary from digital wallets and microloans, which help make it possible without building a bank from the ground up. We can say that FaaS is all about quick access and relevance.
Not only that, we are also seeing banks like DBS and CIMB revamping their roles as financial institutions, and integrating as platforms that offer fintech infrastructure. We are also witnessing the rise of Banking-as-a-Service (BaaS), which is spreading into a wider FaaS trend — empowering everyone from eCommerce platforms to mobility platforms to offer embedded finance to their users.
Why no,w and what’s fuelling this rapid adoption?
What fuels this shift can be categorised into three key drivers: post-pandemic digital acceleration, growing SME demand for tailored financial tools, and regulatory openness through sandbox frameworks.
For Southeast Asia specifically, it has a unique position for embedded finance to become successful “overnight”. A lot of young digital consumers are in the region, smartphone-first behaviour, and a fragmented legacy banking scene. What this does is that this kind of environment actually creates ideal conditions for startups like Advance.AI, Brankas, and Mambu to build API-based fintech rails that serve entire industries.
To further prove this widespread use of FaaS in Southeast Asia, even regulators and government institutions are playing catch-up. Bank Negara Malaysia, Singapore’s MAS, and Indonesia’s OJK, just to name a few, have all rolled out regulatory sandboxes, allowing fintech players to experiment with KYC, lending, and insurance offerings without being hindered by the requirements of full licenses.
All of this to say, the challenges also remain around cross-border compliance and data security. What’s more interesting is that the majority of the markets are pushing for progressive experimentation over outright restriction.
Who are the early “leaders”, and what are they solving?
It is safe to say that startups are actually leading the charge in FaaS, and more specifically in payments, lending, and microinsurance. For example, Mambu enables digital banks and neobanks to launch seamlessly and faster without the need to build a core banking system from scratch. Another example is Brankas, which provides open banking APIs all over the region, which then allow businesses to integrate financial services directly into their platforms.
Over in Indonesia, Kredivo and Akulaku have somewhat popularised Buy Now Pay Later (BNPL) features via marketplace partnerships. While in the Philippines, platforms like PayMongo and PearlPay have established digital banking infrastructure and merchant payments, which are made available even for micro-scale businesses.
So for each one of these, the opportunity is not just about establishing “the next digital wallet”, but it is rather about embedding easy access, trust as well as financial empowerment into existing ecosystems which the users have already used daily.
The future of embedded finance is frictionless
As we anticipate and let this area grow, we will witness that embedded finance evolves from being an “Oh, it’s a good feature to have” comment to a standard expectation.
In all fairness, it is not too early to say that platforms that don’t provide easy, seamless financial features, which include instant insurance, working capital, or even deferred payments, will risk losing, potentially, many users to those that do.
For telecommunications companies, we are also most likely to see them entering the embedded finance world, on top of e-commerce platforms and logistics startups. They can either do this by partnering with FaaS providers or building their own platforms.
It is projected that the embedded finance market in Asia Pacific will reach USD 141.9 billion by 2026, growing at a CAGR of 57.7 per cent. So, a lot of this growth will come from Southeast Asia, where digital-first businesses are embedding payments, lending, as well as insurance directly into their existing and new users.
What does this exactly mean for banks and larger institutions? Well, banks will need to rethink how they think about product delivery from here onwards. For startups, they will need to shift their sole focus to security, compliance as well and lending.
Leading the world towards digitisation seamlessly across industries
One thing that is clear is that finance is no longer a standalone sector. It has become the “glue” of every digital experience in Southeast Asia. Just think about it, when exactly was the last time someone bought something online without seeing a Buy Now Pay Later option? Or booked a Grab without realising your payments, cashback, and even insurance are all covered and powered by embedded financial services?
One could say that this is just the current tech-finance trend, but it is more than that; it’s about adding value to existing platforms, making them more seamless than ever before.