Open Banking Is Just Plumbing - Embedded Finance Is Where the Real Money Is

Why the industry got obsessed with the pipes and forgot about the experience.

Open Banking is one of the most powerful transformations in modern finance, and also one of the most invisible, unloved, and misunderstood. It was supposed to revolutionise banking, energise competition, unleash thousands of new business models, and usher in a consumer-friendly era of financial empowerment.

Instead, it mostly turned into a quiet plumbing upgrade that the public never noticed, the banks never celebrated, and fintechs treat as just another tool in the box.

Meanwhile, Embedded Finance has taken over the world without making a sound.

Every time someone orders a taxi, pays inside a loyalty app, buys insurance at checkout, splits a purchase into instalments, or receives cash advances inside a merchant dashboard, they are interacting with finance that has been melted down, remoulded, and poured directly into the moment where the decision is made.

Open Banking changed the pipes.
Embedded Finance changed the experience.

And in the end, it is always the experience that wins.

This is an article about that shift, and why the real action, power, and opportunity have moved upstream into the embedded layer where customers actually live.

1. The Great Disconnect

When regulators across Europe declared Open Banking a victory, the tone was triumphant. "Access to data for all! Competition! Innovation! A new era!" Banks nodded politely and complied. Fintechs patted the pipes to check they were not leaking. Consumers… well, consumers did not notice, because nobody actually told them anything had changed.

This was not anyone's fault. It was a misunderstanding of where value sits.

Regulators believed that exposing data, consent flows, and API access would create a financial revolution. And in a sense, it did. But it was a revolution visible only to developers, architects, and anyone who can genuinely enjoy a good FAPI profile discussion over coffee.

The public had no idea.
Merchants did not care.
The checkout line did not move any faster.

Meanwhile, Embedded Finance quietly expanded into a multi-trillion dollar category. It is now everywhere: at the checkout, in the ride, under the loyalty card, inside the app, behind the scenes, woven into the consumer journey itself.

It is finance that does not feel like finance.

The disconnect is not a failure of Open Banking. It is a failure to understand that modern value creation happens at the moment where user intent meets economic flow. That is where commercial gravity resides, and that is where the embedded players have built their empires.

2. Open Banking Is Brilliant… but Fundamentally Boring

Let me be clear: I love Open Banking. I love the architecture, the rigor, the consent flows, the beautiful machinery of tokens, signatures, mTLS, and FAPI profiles. It is elegant engineering, and it solved real problems that desperately needed solving.

But, viewed honestly, it is fundamentally boring.

Nobody wakes up excited about OAuth scopes.
Nobody chooses a lender because their id_token_signed_response_alg is correctly set.
Nobody runs around celebrating the fact that their ASPSP finally supports JARM properly.

Open Banking did something critically important: it solved the transport layer and standardised access. It replaced screen scraping with APIs. It modernised authentication. It established secure, compliant flows for data and payments.

But it did not create meaningful user experiences.

It is like installing world class wiring throughout a building. Necessary, foundational, and admirable. But no one buys a ticket to a concert because the electrical cabling in the venue is particularly lovely. People come for the music.

The problem is not Open Banking itself. The problem is that we mistook plumbing for product.

3. Embedded Finance: Where the User Actually Lives

Embedded Finance is the opposite of boring.

It is emotionally legible. It is present at the exact moment the user is trying to do something:

Order a taxi
Split a bill
Pay for a coffee
Buy a phone
Get travel insurance at checkout
Access working capital inside a merchant dashboard
Tap a loyalty card that triggers an invisible payment behind the scenes

Embedded Finance lives in the world of conversion, speed, friction removal, and value creation. It sits directly inside the consumer's flow of intent. It shapes behaviour. It changes outcomes.

It is, in every sense, the living layer of finance.

Merchants love it because it boosts revenue. Platforms love it because it drives loyalty. Users love it because it gets out of the way.

Embedded Finance does not need the user to understand the rail.

The entire industry has been asking the wrong question. We keep asking: “What rails should we use?”

Users only ask:

Did it work?
Was it easy?
Was it cheap?
Did I get my points?

The rail is incidental.
The outcome is everything.

4. A Real Embedded Finance Example (Fully Anonymised)

I am currently deep in the architecture of an embedded payment flow for a large retail ecosystem. A proper national footprint. Massive throughput. Serious loyalty surface.

The challenge was deliciously specific:

We could not touch the POS terminals.
We could not change the merchant software.
We could not modify the loyalty backend.
We had to keep every existing flow intact.
And yet we needed to introduce a completely new payment rail.

In other words:
"Build a brand new financial flow, but do it invisibly, without touching anything."

This is what makes Embedded Finance interesting.
It is architecture under constraint.

So the problem becomes one of choreography:

Detect user intent via a tap or scan.
Allow the device to recognise a custom action without breaking the card scheme.
Open a mobile surface with zero user friction.
Trigger an alternate payment rail instantly.
Settle the payment via instant bank rails.
Back-propagate the success state without touching the merchant.
Make all of this feel like "just tap your phone."

This is pure Embedded Finance.
Not APIs.
Not compliance documents.
Not developer portals full of PDFs.

Real-world flows.
Under real-world constraints.
Built in the shadows of the existing estate.

Open Banking can be one of the rails here. And it may yet be. But the brilliance is not in the rail. The brilliance is in the orchestration.

5. Consumers Do Not Care About Rails

Consumers want certainty.
They want speed.
They want simplicity.
They want invisibility.

They do not care if the payment uses:

Card rails
Network tokens
Stored value
A direct debit
Instant bank pay
A loyalty balance
ACH, RTP, FPS
A custom internal rail

They do not know what these things are.
They do not want to know.

They care about friction.

The industry's obsession with rails is charmingly absurd if you step back far enough. It is like two diners arguing about whether their dinner tasted better because the ingredients were delivered in a Volvo vs a Ford. The vehicle is irrelevant. The food is what matters.

Similarly, the rail is irrelevant. The experience is what matters.

This is the single most important truth in modern financial architecture.

6. Open Banking Is One Enabler — Not The Whole Orchestra

Embedded Finance involves many rails, often working together:

Card present flows
Card not present flows
Network tokens
Direct debit
Instant bank pay
POS value added services
App to app flows
Closed-loop balances
Stored credentials in the wallet
Merchant-specific programs

Open Banking shines in some contexts:

Large payments
High-value transfers
Cash movement with predictable UI patterns
Reducing interchange in e-commerce
Situations where the user is already in their banking app

But it struggles in others:

High-speed POS journeys
Offline fallback requirements
Payments where latency budgets are tiny
Environments with low tolerance for consent friction
Flows that cannot redirect out of an app

The future is not rail-first.
The future is rail-agnostic orchestration.

Modern embedded systems need to choose the right rail for the moment:

cheapest
fastest
lowest friction
easiest to settle
lowest risk
highest conversion
best loyalty integration

Open Banking is part of this picture.
But not the whole picture.

7. The Real Skill: Designing the Flow

This is where the real work sits.
This is where Embedded Finance becomes interesting.
This is where businesses win or lose.

Designing the flow means understanding:

what the user is expecting
what the merchant can support
what the POS estate can tolerate
what the latency budget is
how much failure the flow can absorb
which rail suits the economics
how loyalty or rewards are inserted
how consent flows are triggered (or avoided)
how identity is linked
how the payment reaches settlement invisibly
what the risk posture is
what data the merchant actually needs

This is not product management in the old sense.
This is not engineering in the narrow sense.
This is architecture as choreography.
Architecture as psychology.
Architecture as commercial optimisation.

In Embedded Finance, the flow is the product.
The rail is an implementation detail.

8. Why Banks Miss This: They Think in Products, Not Flows

Banks build products:

accounts
cards
loans
PIS
AIS
APIs
dashboards

Fintechs build flows:

conversions
retention loops
habit-forming journeys
merchant revenue engines
loyalty ecosystems

Banks naturally gravitate toward product thinking because that is their culture. Everything must be governed, structured, risk-reviewed, versioned, modelled, and documented.

Fintechs naturally gravitate toward flow thinking because that is where the money is.

Ask a bank to draw a payment journey and they will often hand you an org chart.
Ask a fintech to draw a payment journey and they will show you where every pixel earns its keep.

Banks have the tools.
But they do not always have the mental model.

Embedded Finance requires a mental model shift from "What product do we want to offer?" to "What moment in the user's life are we trying to inhabit?"

This is not an easy shift for traditional institutions, but it is essential.

9. The Near Future: Agentic Embedded Finance

We are seeing the early stages of something new. Wallets and mobile ecosystems are becoming increasingly intelligent. Real-time decision making is moving to the edge. Decision engines are about to become personal.

In the near future:

your wallet will choose the rail automatically
your device will optimise for cost, speed, loyalty, or risk
your payment will route dynamically
your risk posture will change contextually
your financial flows will self-adjust

This is not science fiction.
It is the logical conclusion of the embedded era.

Open Banking will still exist.
It will still be useful.
It will still be one of many rails.

But the locus of control is shifting from the user choosing a rail to the rail choosing itself.

This is where the embedded era begins to merge with the agentic era. But that deserves its own article.

10. Closing: Why This Matters

Open Banking matters. It is important infrastructure. It is crucial for competition. It is a necessary foundation for a modern financial system.

But it is not where the real opportunity sits.

The exciting work, the work that moves markets and shapes user behaviour, happens in the embedded layer. That is where experiences are built, where friction is removed, where loyalty is reinforced, where commercial value is created, and where users actually interact with financial flows.

Architecture is destiny.
And architecture is becoming rail-agnostic.
The winners will be the orchestrators, not the rails.

People do not care how money moves.
Only that it does.

The future belongs to those who can orchestrate that invisibility.