Why Embedded Finance Is a Major Momentum Driver in Fintech

One of the first eye-catching deal announcements of 2025 has come from credit rating and loan referral company ClearScore, which has acquired fellow fintech firm Aro Finance. Based in Manchester, Aro is a credit broker which embeds its marketplace platform within the digital infrastructure of clients such as Argos, Very and Asda. This allows customers to obtain personal credit and other financial products and services while they shop for, say, clothes and groceries.

The purchase represents a major expansion by ClearScore into the B2B2C sphere, and also underscores the surging appeal of embedded finance propositions to acquirers and investors. Back in 2020, TechCrunch published an article suggesting that “embedded finance might represent fintech’s future” and that “every tech company is potentially a fintech company”. All the signs are that this trend is now going from strength to strength.

Embedded finance refers to the incorporation of typically third-party financial products such as loans, insurance policies, single-click payment services and financial management tools into the existing platforms of ostensibly non-financial companies. Demand for such solutions is growing apace.

According to data published this month by Research and Markets, the embedded finance market is expected to expand at a compound annual growth rate of 36.4% from around $146 billion in 2025 to around $690 billion at the end of the decade. In Europe alone, revenues from embedded finance products are expected to surpass $103 billion by that point.

This evolutionary shift from legacy banking models, and the blurring of the once stark boundary between financial and non-financial organisations, has been fuelled by changing consumer attitudes. A recent report by Ernst & Young Global summed up this shift well, saying:

“Consumers and businesses increasingly expect financial products and services to be tightly integrated into their daily activities, for example, being able to pay for parking as they drive into a parking garage or getting financing at the point of purchase in real-time. Fundamentally, these integrated experiences go beyond ‘digital financial services,’ and instead, are moving us closer to the next revolution in finance. Financial services will become an embedded component of a broader value chain experience: financial services in the experience age.”

Growth in embedded lending, embedded insurance and associated products and services is being driven by a number of key factors. First and most fundamentally, there’s the technological context.

As the recent Research and Markets report into embedded finance notes, “consumers around the globe are switching toward e-commerce, which is expected to augment the market growth during the forecast period”. Moreover, technological advancements in application programming interfaces (APIs) have lowered the barriers to interoperability, making it easier for businesses to implement embedded finance solutions and share information with other systems.

There’s also growing awareness among merchants of the revenue potential of embedded finance, which allows them to earn their share of transaction fees, cross-sell products, and increase engagement and user loyalty by providing a seamlessly interconnected shopping and finance experience. In other words, more value is added to the customer journey in a frictionless way, with the added benefit of providing merchants with more customer data which they can use to improve their core products and services.

Regulatory developments are also facilitating embedded finance, a case in point being the European Union’s Financial Data Access (FiDA) framework. Anticipated to go live in 2027, FiDA is part of a wider strategy to expand open banking into a broader open finance ecosystem, and will require banks and other financial institutions to make customer data pertaining to accounts, loans, mortgages, savings and other assets available to businesses (with customer consent).

Designed to foster greater transparency, increase security, empower customers to handle their own data as they see fit, FiDA is an example of how new regulatory frameworks will actively promote the development of ever-more convenient embedded finance solutions in the years to come.

ClearScore’s strategic acquisition of Aro comes in the wake of other notable M&A transactions in this segment. In December, US fintech giant Fiserv expanded its embedded finance portfolio with its $140 million acquisition of Payfare, a Canadian platform which facilitates instant payments and cash-back rewards for gig economy workers, and has partnered with the likes of Uber and Lyft. The deal is part of a long-term strategy by Fiserv, announced the year before, to offer embedded finance capabilities to its clients and partners.

Another December development, on this side of the Atlantic, was the $22.6 million Series B fundraise secured by Mynt, a Stockholm fintech whose technology makes it easier for businesses to record and track expenses. Its spend management platform can integrate seamlessly with accounting and ERP systems such as Fortnox, Visma and Microsoft Dynamics. The company aims to use the recent windfall to scale its API-based embedded finance platform throughout the UK and central Europe.

Earlier in 2024, another embedded finance-focused fintech, Egypt’s Connect Money, closed an $8 million seed funding round which it is using to extend its reach in North African markets. Connect Money issues white-label payment cards, allowing its clients to issue branded debit and credit cards, and provide access to shopping and rewards platforms, without having to create fintech systems or jump through regulatory hoops themselves.

These are just a few of the M&A milestones in embedded finance of late, and are a harbinger of increased activity to come. If you’re a founder or senior decision maker seeking to follow in their footsteps, get in touch with our expert fintech dealmakers to get the ball rolling.