Embedded Finance in B2B Digital Banking: Unlocking Value for SMEs

The Next Evolution in SME Banking

The financial services industry is undergoing a profound transformation, and at the heart of this change is embedded finance—the seamless integration of banking, payments, lending, and working capital solutions directly into the digital platforms that small and medium-sized enterprises (SMEs) use every day. For SMEs, which have historically been underserved by traditional banking models, embedded finance represents a new era of access, efficiency, and tailored value. For banks and fintechs, it is a strategic imperative to reach new customer segments, differentiate offerings, and unlock new revenue streams in a rapidly digitizing world.

What Is Embedded Finance for SMEs?

Embedded finance brings financial services to the point of need, within the business workflows and platforms that SMEs already rely on—such as ERP, procurement, and accounting systems. Instead of toggling between a bank portal and their business software, SMEs can now access payments, lending, insurance, and working capital solutions directly within their core business tools. This integration removes friction, accelerates decision-making, and enables SMEs to focus on growth rather than administrative complexity.

Why Now? The Drivers Behind Embedded Finance

Several converging forces are accelerating the adoption of embedded finance in the B2B space:

Digital Transformation: The digitization of industries like e-commerce, logistics, and professional services has created fertile ground for embedding financial services. Lower integration costs and the proliferation of APIs make it easier than ever to connect banking capabilities to third-party platforms.
Customer Expectations: SMEs and their end-users demand seamless, contextual experiences. Embedded finance eliminates the need to switch between apps or providers, streamlining everything from payments to lending.
Access to New Segments: Non-financial platforms often have deep insights into their users and can reach underbanked or underserved SMEs. By partnering with these platforms, banks can tap into new markets.
Monetization and Growth: Embedded finance enables both banks and their partners to generate new revenue streams—through transaction fees, lending margins, or value-added services.
Regulatory Evolution: Open banking and data-sharing initiatives are making it easier and safer to integrate financial services across ecosystems, while also encouraging innovation and competition.

The Opportunity—and the Challenge—for Banks

While fintechs and digital-native challengers have led the way, traditional banks are uniquely positioned to win in embedded finance. They bring regulatory expertise, risk management, and established trust. However, success requires a shift from product-centric thinking to ecosystem collaboration and customer-centric design. Banks must:

Develop clear embedded finance strategies aligned with their strengths and market position
Build or partner for new technology capabilities—from API management to real-time data analytics
Foster a culture of innovation and agility to move at the speed of digital platforms
Prioritize seamless, secure, and compliant experiences for both partners and end-users

Capabilities Required for Embedded Finance Success

To differentiate and scale in the embedded finance era, banks and financial institutions need to invest in three core capability areas:

1. Proposition Development with Partners

Move beyond traditional product silos. Co-create blended offerings with non-financial partners—combining financial services with business tools, marketplaces, or industry-specific solutions. This approach unlocks new value for SMEs and creates stickier, more relevant propositions.

2. People and Operating Model

Effective partner management is critical. Banks must establish dedicated teams and processes to support ecosystem collaboration, from onboarding to ongoing support. Integrating Banking-as-a-Service (BaaS) capabilities into existing infrastructure enables seamless coordination between embedded finance and core banking functions.

3. Modern, Decoupled Technology Architecture

Legacy core systems are a barrier to agility. Banks should transition to modular, API-driven architectures that can scale and adapt to new partners and use cases. Cloud-native platforms, real-time data integration, and robust security are essential to support a growing network of BaaS partners and deliver on the promise of embedded finance.

Real-World Impact: Case Study

A leading example of embedded finance in action is the rapid launch of a BaaS-first commercial SME bank, built in just nine months and targeting 350,000 SMEs. This platform:

Orchestrated 22 fintech partners
Delivered fully automated operational processes
Enabled seamless integration with ERP and finance systems via APIs
Leveraged a cloud-native, event-driven architecture with real-time data analytics
Provided flexibility to swap or run multiple fintech solutions per functional area, supporting true partnerships and joint roadmaps

The result: a scalable, composable platform that delivers tailored financial services directly within the digital environments SMEs use to run their businesses.

A Roadmap for Banks: Differentiating and Scaling Embedded Finance

To seize the embedded finance opportunity, banks should follow a clear roadmap:

Define Target Markets and Partners: Identify the most promising customer segments and platform partners. Focus on areas where the bank’s capabilities and brand can add unique value.
Assess Viability and ROI: Evaluate the effort required to open up banking capabilities and scale with partners. Consider the long-term sustainability and potential returns of embedded finance initiatives.
Build a Comprehensive Capability Strategy: Determine which parts of the technology stack and operating model are ready for BaaS integration, and where to invest in modernization or partnerships. Ensure alignment with broader digital transformation efforts.
Prioritize Customer-Centricity: Design every embedded finance proposition around the needs of SMEs and their end-users, not just the bank’s legacy products.
Invest in Data and Compliance: Ensure robust data governance, privacy, and regulatory compliance frameworks are in place to build trust and meet evolving requirements.

The Future Is Embedded—and It Starts Now

Embedded finance is reshaping the future of B2B digital banking. Banks that act now—by building the right capabilities, forging the right partnerships, and embracing a customer-centric, ecosystem mindset—will be best positioned to lead in this new era. SMEs, long underserved by traditional banking, stand to benefit most from this transformation, gaining access to tailored, contextual financial services that power their growth.

Publicis Sapient stands ready to help banks and fintechs navigate this transformation and unlock the full potential of embedded finance for their business and their SME customers.