Platforms, embedding and the fight for the customer interface

The fight is for the top layer. Whoever owns the interface owns the customer, the data and the pricing power. The layers below get commoditised.

Embedded finance, defined

Embedded finance means financial services delivered inside a non-financial company's product, at the point of need, so the customer does not go to a bank at all.

Examples in the wild:

• Shopify offers merchants a bank-like account (Shopify Balance), business loans and cash advances (Shopify Capital) directly inside its store dashboard. A Shopify seller manages money without ever opening a business bank account.
• Amazon offers sellers financing and, in various markets, has run co-branded cards and buy-now-pay-later options at checkout.
• Apple built Apple Pay, Apple Card, Apple Cash and (in the US) a savings account, all inside the iPhone.

None of these three is a bank. Each partners with a licensed bank behind the curtain.

Banking-as-a-Service: how the plumbing works

For a platform to embed banking, it needs a licensed partner. Banking-as-a-Service (BaaS) is the model where a licensed bank rents out its license, balance sheet and regulatory permissions to a non-bank, via software connections called APIs (Application Programming Interfaces, the technical pipes that let two systems talk).

The typical division of labour:

| Layer | Who does it | Example |

|---|---|---|

| Customer relationship, brand, app | The platform | Apple, Shopify |

| BaaS coordination / middleware | Fintech enabler | (historically firms like Marqeta for card issuing) |

| License, deposits, lending, compliance | The licensed bank | Goldman Sachs (Apple's long-time card partner) |

The key power question: who captures the margin, and who carries the risk?

Often the platform captures the customer and a large share of the economics, while the bank carries the credit risk, the capital requirement and the regulatory liability. That is a bad trade for a bank if it becomes the default, and a good trade for the platform.

Andreessen Horowitz's essay "Every Company Will Be a Fintech Company" is a useful free primer on why non-financial firms rush to embed finance.

Why platforms want in

Platforms do not embed banking because they love regulation. They do it for three concrete reasons:

1. Retention. A Shopify merchant with a Shopify loan and a Shopify account is far less likely to leave. Finance is a lock-in.

2. Data. Amazon already knows a seller's exact sales history, so it can underwrite a loan faster and more accurately than a bank staring at a spreadsheet. That data advantage is structural.

3. Margin. Payments and lending are lucrative. Skimming a slice of every transaction inside your own ecosystem is pure incremental revenue.

Notice that Apple, Amazon and Shopify each embed finance where they are already strongest: Apple at the phone (payments), Amazon and Shopify at the merchant (working capitalworking capitalWorking capital is the difference between a company's current assets and current liabilities, measuring short-term liquidity and the funds available to run daily operations.View full definition → lending). They are not trying to become full banks. They are cherry-picking the profitable, high-frequency, data-rich moments.

The regulators keep the license moatmoatA lasting edge over competitors: a resource, capability or position they cannot easily replicate, letting a firm earn above-average returns over time.View full definition →

Here is the constraint that stops platforms from simply becoming banks: you cannot take deposits or lend at scale without a banking license, and getting one is slow, capital-heavy and heavily supervised.

In the US, deposit-taking is regulated by bodies including the OCC (Office of the Comptroller of the Currency), the FDIC (Federal Deposit Insurance Corporation, which insures deposits), and the Federal Reserve. In Europe, the ECB (European Central Bank) supervises large banks, alongside national regulators.

So platforms rent, rather than buy, the license. This is why the licensed bank does not disappear entirely. It becomes a supplier.

The BaaS reality check

Renting your license is not free money. US regulators have made this painfully clear. Several BaaS-focused banks have faced enforcement actions over weak oversight of their fintech partners, particularly around AML (Anti-Money Laundering) controls and knowing who the end customer actually is.

The 2024 collapse of Synapse, a BaaS middleware provider in the US, froze funds for many end users and exposed how messy the ledgers between platform, middleware and bank can be. It was a warning: when you rent your license, you still own the blame.

The power struggle: who ends up commoditised?

Think of it as a tug of war over the value chain.

The platform's leverage: it owns the customer, the data and the distribution. It can switch bank partners. Apple famously wound down aspects of its Goldman Sachs partnership, a reminder that the platform, not the bank, decides who supplies the balance sheet.

The bank's leverage: it holds the one thing that is legally scarce, the license, plus deep compliance capability the platform does not want to build. Regulation is the bank's moatmoatA lasting edge over competitors: a resource, capability or position they cannot easily replicate, letting a firm earn above-average returns over time.View full definition →.

The uncomfortable middle outcome for banks is becoming a commoditised balance-sheet supplier: interchangeable, competing on price, invisible to the end customer. If ten banks all offer the same rented-license service, the platform picks the cheapest. That is the fate incumbents fear.

Not all banks accept this. Some are fighting back:

• JPMorgan Chase and other large US banks invest heavily in their own apps and payment tools to keep owning the interface directly.
• Some banks refuse the pure supplier role and insist on co-branding, keeping their name visible (the old co-branded credit card model).
• Others lean in and build genuinely strong BaaS businesses as a deliberate wholesale strategy, treating it like any other B2B product.

Europe versus the US: a regulatory nuance

The embeddingembeddingAn embedding is a numerical vector that represents data (text, images, or items) in a way that captures meaning, so similar items sit close together in space.View full definition → fight looks different across the Atlantic, largely because of one rule.

In Europe, PSD2 (the second Payment Services Directive, EU law) forced banks to open customer data to licensed third parties via APIs. This is open banking: the customer can authorise a third party to see their bank data or initiate payments. It lowered the barrier for platforms and fintechs to build on top of banks. A successor framework, often discussed as PSD3 and a Payment Services Regulation, has been progressing through the EU legislative process, aiming to tighten and extend these rules.

In the US, there is no single equivalent mandate, though the CFPB (Consumer Financial Protection Bureau) has worked on a personal financial data rights rule under Section 1033 of the Dodd-Frank Act to push open banking. Its final shape and enforcement have been contested. Note this is a fast-moving area as of early 2026, so treat specifics as subject to change.

The practical effect: Europe pushed embeddingembeddingAn embedding is a numerical vector that represents data (text, images, or items) in a way that captures meaning, so similar items sit close together in space.View full definition → forward by law, while in the US embeddingembeddingAn embedding is a numerical vector that represents data (text, images, or items) in a way that captures meaning, so similar items sit close together in space.View full definition → has been driven more by commercial deals and the sheer scale of platforms like Apple and Amazon.

A simple way to see who wins the margin

Imagine a customer pays $100 at a checkout using an embedded pay-in-installments product.

• The platform charges the merchant a fee, say 5% (illustrative estimate, fees vary widely): $5 of revenue.
• The platform pays the licensed bank a fixed wholesale fee for using its balance sheet, say $1 (illustrative).
• The bank carries the credit risk if the customer does not repay.

Platform keeps roughly $4 and owns the customer. Bank keeps roughly $1 and owns the risk.

These numbers are purely illustrative, but they show the structural problem: the party that owns the interface captures the fat margin and the low risk. The party that owns the license captures the thin margin and the real risk.

Key takeaways

• The interface is the prize. Whoever owns the app and the customer moment (Apple, Amazon, Shopify) captures data, loyalty and the largest margin. Banks risk becoming invisible suppliers.
• Regulation is the bank's moat. Only a licensed, FDIC-insured (US) or ECB-supervised (EU) entity can take deposits and lend at scale. Platforms rent this, they do not replace it.
• Renting your license carries real risk. The Synapse collapse and multiple US enforcement actions show that a bank supplying BaaS still owns the compliance and reputational liability.
• Europe legislated embedding (PSD2 open banking); the US did it commercially. The endpoint is similar, the path differs.
• The strategic choice for banks is stark: fight to own the interface, insist on co-branding, or accept the wholesale supplier role deliberately and profitably. Drifting into commoditisation by accident is the losing move.