Embedded Finance is Booming, but Third-Party Access Could Break It

Without the right identity foundation, your partnerships become your weakest link.

Embedded finance is no longer on the horizon, it’s here, and it’s redefining how consumers and businesses interact with financial services. From retail apps offering one-click loans to HR platforms integrating earned wage access, the experience is fast, seamless, and invisible.

Behind the scenes, however, lies a growing risk that few want to talk about: third-party access. The partnerships driving embedded finance are complex and expanding. And unless financial institutions can manage them securely and at scale, the entire model could become unsustainable.

A Market Racing Ahead of Its Controls

The embedded finance industry in the UK is projected to reach $7.76 billion in transaction value in 2024, with forecasts indicating growth to $18.9 billion by 2029. The growth is global, and accelerating. But each integration, whether for payments, lending, insurance, or wealth management, hinges on third-party entities gaining access to sensitive APIs, systems, and data.

These partners, fintechs, aggregators, brokers, and service providers, aren’t just plug-ins. They’re extensions of your customer experience. Yet, many institutions still treat them like internal vendors, applying outdated identity models and manual processes that simply can’t scale.

When onboarding takes months and deprovisioning falls through the cracks, speed-to-market stalls and compliance risk skyrockets.

The Numbers Speak for Themselves

Over 50% of organisations have experienced a breach stemming from third-party access. Common causes? Misconfigured credentials, over-permissioned users, and outdated accounts no one remembered to turn off.

These aren’t technology failures but governance failures. And with new regulations like the EU’s Digital Operational Resilience Act (DORA) in full effect, institutions must now prove that every partner, and their downstream vendors, have the right access, at the right time, for the right reasons.

Sector by Sector, the Problem Deepens

Banks are embedding payments and account services into third-party platforms at record speed. But when access is rushed or inconsistently governed, APIs become vulnerable and customer data is exposed.

Insurers work with sprawling networks of brokers, managing general agents (MGAs), and administrators. Each requires portal access, yet few institutions can enforce uniform access policies across business units or regions. When indirect relationships, like outsourced service providers, enter the picture, the visibility gap widens.

Wealth managers must give external advisers access to sensitive portfolios and client data. Their roles vary by geography and firm, yet traditional identity and access management (IAM) solutions struggle to enforce appropriate delegation and entitlements.

Across all sectors, one truth holds: third-party access is getting harder to control, just as it’s becoming more mission-critical.

Why Legacy IAM Isn't Up to the Job

Most identity platforms today were built for either employees or consumers, not business partners. They’re tied to HR records or optimised for individual logins, not for federated identity, delegated administration, or cross-organisational policy enforcement.

To fill the gap, many institutions patch together manual processes, custom code, and policy spreadsheets. But as embedded finance scales, these stopgaps become bottlenecks, and liabilities.

The result: slower onboarding, increased operational cost, and compliance headaches that regulators are no longer willing to overlook.

Identity Fabrics: The Modern Solution

To address these growing demands, more institutions are embracing the notion of identity fabrics.

An identity fabric is a set of converged IAM capabilities designed to manage access across all user types, internal staff, customers, and external partners alike. This enables:

• Federated identity and bring-your-own-identity (BYOI), so partners can authenticate using their existing systems
• Policy-based access control (PBAC), adapting permissions based on role, context, and risk
• Delegated administration, allowing trusted partners to manage their own users within defined guardrails
• Lifecycle automation, ensuring timely provisioning and deprovisioning tied to contractual terms
• End-to-end auditability, aligned with DORA, GDPR, ISO 27001 and other global frameworks

This model not only reduces integration friction, it future-proofs access governance as embedded ecosystems grow more interconnected.

Embedded Finance Deserves Embedded Trust

What embedded finance enables is remarkable: new revenue models, expanded reach, and richer customer experiences. But without the identity infrastructure to match, those gains are easily undone.

When partners become your digital storefront, identity isn’t just a security layer, it’s a strategic enabler.

The financial institutions that get this right will be the ones that scale fastest, integrate deepest, and earn the most trust, both from customers and regulators.