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NewsBriefs

ana, particularly targets industrial loan companies (ILCs), finance is expected to grow from its current $2.6 trillion,
which have expanded their financial services while avoid- accounting for 10 percent of GDP, to reach $7 trillion.
ing the regulatory scrutiny faced by traditional banks and
credit unions. ILCs have leveraged a loophole in the Bank Embedded finance is transforming the banking value
Holding Company Act, creating what senators refer to as chain by integrating financial services directly into retail-
a "shadow banking system." Square (now Block) is among ers' sales channels, researchers noted, adding that this al-
the companies that have obtained ILC charters, allowing lows banks to own the customer experience from end to
it to offer services like Square Loans and Square Savings end and offer trusted financial services within a conve-
with FDIC coverage. nient and familiar environment.

The proposed legislation aims to close this loophole and Key benefits of embedded finance, researchers found, in-
place entities like Square Financial Services under the clude instant customer access to tailored financial solu-
Fed's regulatory oversight, aligning them with traditional tions, the creation of new revenue streams for businesses,
banking rules. Supporters maintain that this regulatory reduced costs through digital distribution, and improved
tightening is necessary to prevent nonbanks from gaining customer value and retention. The report suggests that
unfair advantages over banks and credit unions, ensuring banks can leverage deep integrations to optimize custom-
consumer protection and financial system stability. The er engagement and actively participate in the retail value
bill has received support from both financial institutions chain.
and consumer groups.
Researchers point out that by connecting with customer-
Embedded finance gains global facing third parties, financial institutions can access ad-
momentum, study finds ditional revenue opportunities, ranging from 10 percent
to 100 percent of the total value created within the value
According to a new report by the Mobey Forum, embed- chain. Various strategic options, such as creating market-
ded finance is set to have a significant impact on the bank- places, using APIs or partnering with providers, can be
ing industry in both Europe and the United States. By pursued to capture these opportunities.
2026, it is predicted that 15 percent of European finance
will be embedded, while in the United States, embedded

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