Can Embedded Finance Help Neobanks Outperform Traditional Banks?

Embedded finance is transforming how consumers and businesses interact with financial services. By integrating payments, lending, insurance, and investment solutions directly into non-financial platforms, companies are reshaping the banking landscape, as stated in The Fintech Times. As this trend grows, could embedded finance be the key for neobanks to finally overtake traditional banks?

Neobanks Gaining an Edge

Neobanks have risen rapidly over the past decade, yet traditional banks still dominate market share. However, embedded finance may shift this balance.

Luke Voiles, CEO of Pipe, believes embedded finance gives neobanks a significant advantage: “Embedded finance equips neobanks with powerful tools to enhance user experience and financial accessibility, differentiating them significantly from traditional banks. NPS satisfaction scores for traditional banks have been in the 20s and 30s. We’ve seen embedded capital hit the 70s, 80s, and even 90s. LTV and retention hinge on that customer experience. As customers come to expect that friendlier experience, it’s going to be a race to see who can implement it the fastest, and neobanks are likely to have an edge in agility.”

Traditional Banks Playing Catch-Up

Nick Botha, global payments lead at AutoRek, agrees that neobanks are better positioned to leverage embedded finance: “Neobanks are built with innovation and agility. With an established digital presence and seamless, consolidated platforms, they can integrate services into non-financial ecosystems—positioning them to not only compete but surpass traditional banks in reach.”

Meanwhile, traditional banks face challenges in adapting due to legacy systems and slower digital transformation.

Flexibility and Innovation Driving Success

Meryem Habibi, CRO at Bitpace, highlights how embedded finance enables smoother transactions and crypto integrations: “Embedded finance gives neobanks a distinct advantage by letting them build seamless experiences where users can pay, invest, or settle funds without ever leaving the app. Unlike traditional banks tied to legacy infrastructure, neobanks can quickly adopt decentralized rails and blockchain-powered tools.”

Steve Round, co-founder of SaaScada, notes that embedded finance enhances customer engagement: “Neobanks are already digital-first, making them ideal for embedded finance. By embedding banking services, they collect more data to deliver personalized products. However, they must choose between outsourcing financial services (quicker but restrictive) or building their own regulated infrastructure (more flexible but complex).”

Alex Mifsud, CEO of Weavr, concludes that embedded finance’s real power lies in making financial services seamless: “Embedded finance is a new channel for delivering financial services, just like the web or mobile were. Neobanks that integrate finance into context-rich platforms—such as payroll or procurement—can create stickier ecosystems. While traditional banks dominate in balance sheets, neobanks can outpace them in user experience, relevance, and speed.”As embedded finance becomes mainstream, neobanks are well-positioned to leverage their agility and digital expertise. If they continue innovating while ensuring security and compliance, they may finally surpass traditional banks in customer adoption and market influence.