Industry Corner: Banks vs. Fintechs: Turning embedded finance into growth

Writer: Mirella Franzese

Industry corner is a monthly series on what company leaders believe are the most important best practices in their sector or organization to ensure growth and sustainable success.

August 2025 — While tech continues to disrupt key industries across the globe, the financial industry now faces a new digital rebellion: the rise of fintech innovation. But in today’s digital economy, where clients are increasingly prioritizing agility and accessibility, U.S. banks risk losing market share to convenience rather than competition. In this sense, the financial system of the future won’t be built in banks, but rather deeply embedded in the apps, platforms, and services that customers already use, according to the World Economic Forum. 

“Traditionally, businesses focused heavily on day-to-day operations, with a smaller portion dedicated to innovation and growth,” Kaufman Rossin’s Digital Transformation Services Director Vera Nieuwland told Invest:. “In the digital era, that balance shifts. More of the business becomes systematized, allowing greater focus on continuous improvement, growth, and innovation.” 

According to Nieuwland, the growth of embedded finance platforms — or the seamless integration of payment or lending solutions within non-financial systems — is shifting how key players in the space operate and interact with customers in a number of ways.  

The Fintech-Banking Relationship

For one, the relationship between banks and fintechs has evolved. Banks are also no longer competing with fintech platforms, but rather integrating them into their own programs to monetize convenience and meet clients where they are in real time. “Fintechs are nimbler, often better suited to solve hyper-specific problems quickly. Banks, on the other hand, offer scale, trust, and capital,” wrote Tariq Bin Hendi, CEO and member of the Astra Tech Board, in an article for The World Economic Forum. Synergy between the two offers unparalleled opportunities to boost operational efficiencies and enhance product and service offerings, which is why organizations like Fifth Third Bank are consolidating efforts to invest in technology, including acquiring fintech companies. 

“Our approach is simple: If a fintech solution enhances the client experience, we seek to partner with or acquire it,” said Fifth Third Bank’s South Florida Region President Stephanie Green in an interview with Invest:. “Technology is reshaping banking, and we are committed to integrating the best solutions to expand and improve our offerings.” 

To that end, the bank recently acquired and embedded Provide, a fintech specializing in financing healthcare businesses, into their small-business lending platform, a move that reduced approval times from 30 days to just two-and-a-half. On the embedded payments front, Fifth Third Bank also launched Newline by Fifth Third, a banking interface platform to deposit products directly with the organization, which grants businesses access to the latest in embedded finance technology.

The growing fintech-banking relationship means that banks can embrace disruption and capitalize on the digitalization of the U.S. economy, all while staying relevant to modern customers. Fintechs, on the other hand, can benefit from a bank’s strength of reputation and broad access to capital. “Collaboration, not competition, will define the winners of the financial future,” added Hendi.

Financial Literacy 

Embedded finance is also making financial education more accessible. User-friendly platforms and intuitively built apps are eliminating barriers to entry and improving access for all users, including those previously excluded due to knowledge gaps or lack of know-how, such as SMEs and underserved individuals. This makes financial education more accessible, as digital tools have simplified investment, increased personalization, and enhanced access to financial advice in real time, among other advancements. 

“The next wave of financial inclusion won’t come from traditional branches, but from intelligent, contextual platforms that can anticipate user needs and deliver tailored financial solutions with a depth of understanding that traditional models simply can’t match,” Hendi suggests.

READ MORE: Why financial literacy matters more than ever in an uncertain economy

Platform Dominance In 2025, digital infrastructure is no longer a competitive advantage, it’s a necessity. Online platforms, such as apps, software, and other tools from Shopify to Salesforce, are propping up the modern digital economy as more than half of U.S. customers manage finances primarily through mobile apps, according to the American Bankers Association (ABA). Client expectations have shifted as a result. Transactions need to be instant, convenient, and invisible; clients don’t want to switch between different platforms to execute payments or manage investments.

Mobile solutions are the preferred channels for digital banking in this regard. A survey conducted by Morning Consult on behalf of ABA found that mobile apps are the top choice among 55% of banking customers for managing financial accounts, compared to 22% of clients who reportedly prefer laptops or PCs. Branch visits were among the least popular choices (8%), followed by ATM visits (5%) and phone calls (4%). 

According to Brooke Ybarra, ABA’s senior vice president of innovation strategy, the pandemic greatly accelerated the pace at which global financial institutions adopted mobile banking solutions, but American banks were the first to bet on the sector’s growth. 

“America’s banks have sustained – and even increased – this growth by investing in innovative technologies that make banking on-the-go as seamless and secure as ever before,” said Ybarra in a press release. “Customers can deposit a check remotely, split a dinner bill with a friend instantaneously, and track their spending and saving patterns with ease on their mobile device. With most Americans using a mobile device every day, digital banking options have helped bring unbanked households into the banking system, connecting them with all of the benefits that come with a bank account.” 

A Balancing Act

Although AI automation and embedded finance can streamline banking operations and cut down administrative burdens for personnel, industry experts believe that when it comes to relationship management and client personalization, face-to-face interactions still offer unmatched core advantages.

“Banking is still a relationship business, and there is a lot of value in meeting with clients,” MidFirst Bank’s Houston Market President Brian Heflin told Invest:. “The larger, more complex the transaction, the more you need an experienced banker,” Heflin said, adding that, “Our job as bankers is to listen, learn, and understand our customers and personalize solutions that help them achieve their goals. This may be difficult to do in a digital and less personal manner.” 

Banks like MidFirst are investing in online platforms to streamline internal processes and enhance efficiency, not to redefine the customer interaction.

Carefully calibrating fintech innovation with traditional banking infrastructure can also present new opportunities in preemptively servicing customers. Banks like Fifth Third, for instance, are leveraging machine learning within their mobile app to anticipate customer needs and offer different types of support, all while continuing to invest in brick-and-mortar financial centers for face-to-face assistance. 

“Many are surprised by our continued investment in retail financial centers, given the prevalence of mobile banking. However, research indicates that when financial issues arise, customers prefer face-to-face interactions over calling a helpline,” David Briggs, the regional president of Fifth Third Bank’s Tennessee branch, told Invest:. He added that modern financial centers are no longer traditional teller-based branches. “Instead, they are designed as advisory hubs where customers can have meaningful financial discussions.” 

Risks

As more banks default to the financial platform model, fraud prevention and ensuring strict compliance with regulations will be increasingly fundamental. The shift to digital means financial companies will need to plan for increased scrutiny from regulators and enact new measures to protect against the rising threat of cybersecurity attacks. Yet, most studies report that corporations are overconfident and underprepared in their approach. Nearly 90% of U.S. companies lost money to cyber fraud in 2024, while just under half suffered losses of $10 million or more from payment fraud, according to a new report from global fraud prevention platform Trustpair. Companies will need to adhere to strict guidelines for data privacy to retain trust and prevent legal liabilities or monetary fines.

READ MORE: US businesses face deepening cyber threat

“Cyber fraud is one of the most pervasive risks for any company,” said Founder, Chairman, President, and CEO Aaron Dorn of Studio Bank in an interview with Invest:. For Dorn, the most effective measure to protect against cyberattacks is education: raising awareness and teaching bankers and customers alike on how to safely use embedded finance platforms. “We find that the weakest link in security is often the human element, such as individuals clicking on malicious links or using easily guessable passwords,” he added. 

Although technology like multifactor authentication and real-time network scanning can be leveraged to protect clients, human awareness remains critical. “The solution is multifaceted, requiring continuous vigilance, training, reminders, and strict policies,” said Dorn.