Embedded finance, banking, lending, and payment features built directly into non-financial apps and platforms rather than accessed through a standalone bank, has become close to universal among businesses in 2026, with 99.8% of firms now offering at least one embedded financial capability, according to industry tracking cited by PYMNTS. Eighty-six percent of companies report the shift has measurably improved their financial performance, and 75% specifically credit it with driving customer growth. The global embedded finance market itself is valued around $115.8 billion as of 2024 and is projected to reach $251.5 billion by 2029, a 16.8% compound annual growth rate, with the narrower banking-as-a-service infrastructure layer underneath it expected to hit $74.8 billion by 2030.
Gartner’s own forecast puts a sharper point on how far this has already gone: more than half of all consumer financial transactions are expected to be initiated on third-party digital platforms rather than through a bank’s own app or website, a genuine redistribution of where financial engagement actually happens. Lending, not payments, is now described as the most consequential frontier inside embedded finance, with more platforms moving beyond simple checkout payment processing into offering credit products directly at the point of need, the same dynamic driving BNPL growth in markets like the Philippines.
The infrastructure layer making all of this possible, banking-as-a-service, has just been through a genuinely serious stress test. Synapse Financial Technologies, a major BaaS middleware provider connecting fintech apps to partner banks, collapsed in April 2024, freezing more than $265 million in funds belonging to over 100,000 end customers who had no direct relationship with Synapse itself, only with the fintech apps built on top of it. The failure traced back to disputes with partner banks, operational ledger breakdowns, and inaccurate for-benefit-of account records that created a roughly $95 million shortfall between what banks actually held and what they owed customers, a structural failure mode specific to the layered BaaS model, where no single party in the chain, the consumer-facing brand, the BaaS middleware provider, and the partner bank, was clearly and solely accountable when the reconciliation broke down.
Regulators have responded with real enforcement rather than just guidance. The UK’s Financial Conduct Authority fined a BaaS provider £21.1 million in 2025 for financial crime control failures, including inadequate customer onboarding checks that let bad actors open accounts through the fintech apps riding on top of the provider’s infrastructure. In the US, the FDIC proposed a new rule in October 2024 specifically requiring better for-benefit-of account recordkeeping, directly responding to the Synapse failure mode. The OCC hit Blue Ridge Bank, a common partner bank for fintech BaaS arrangements, with a consent order in January 2024 over Bank Secrecy Act and anti-money-laundering system breakdowns, and the Federal Reserve issued a cease-and-desist order against Evolve Bank & Trust in June 2024 specifically over its fintech partnership practices. More than a quarter of all FDIC formal enforcement actions and over a fifth of OCC actions now specifically target sponsor banks in these embedded finance arrangements, a sharp shift in regulatory attention toward the banks underwriting fintech partnerships rather than only the fintechs themselves.
The pattern across all of these enforcement actions is consistent: regulators are targeting the sponsor bank and BaaS middleware layer specifically, the invisible plumbing behind a consumer-facing app, rather than the fintech brand a customer actually interacts with. That’s a meaningful shift in where compliance risk actually sits in the embedded finance stack, and it puts new pressure on any fintech, in the Philippines or anywhere else, building a product on top of a third-party banking-as-a-service provider to actually understand who its BaaS partner’s sponsor bank is and how that bank has handled its own regulatory obligations, rather than treating the banking infrastructure underneath a slick app as an implementation detail that doesn’t require its own due diligence.
For Philippine fintechs, most of which still build directly on top of BSP-licensed banks or hold their own licenses rather than routing through third-party BaaS middleware the way many US fintechs do, the Synapse collapse and the enforcement wave that followed it is a useful cautionary tale about a structural model the Philippine market has mostly avoided so far, deliberately or not. As embedded finance expands further into Philippine e-commerce, ride-hailing, and retail platforms looking to bolt on payments and credit features without becoming banks themselves, BSP will eventually face the same core accountability question US regulators have just spent two years enforcing against: when a layered fintech-BaaS-bank chain breaks down, whose job was it to catch the problem before customer funds were at risk.
The lending shift inside embedded finance is the piece most directly relevant to how Philippine consumer credit is evolving right now. As more platforms move past simple embedded payments into embedded lending, letting a ride-hailing app, an e-commerce marketplace, or a delivery platform offer credit directly at checkout without the customer ever visiting a bank’s own app, the line between a payments company and a lender gets blurrier, and the regulatory question of who’s actually underwriting the credit risk, the platform, its BaaS partner, or the sponsor bank behind both, gets harder to answer cleanly. That’s precisely the ambiguity Synapse’s collapse exposed in the US market, and it’s the same ambiguity the Philippines’ own buy-now-pay-later providers, most of which already operate through some combination of SEC lending licenses, BSP payment-system partnerships, and third-party merchant integrations, will eventually have to resolve more explicitly as their own embedded lending volumes scale toward the billions of dollars the market is already forecasting.
Share this article