Maybe you’ve noticed a difference when you’re shopping. From online marketplaces issuing branded credit cards to supermarkets offering instant financing at the checkout, major consumer brands are acting more and more like banks.

Far from being a purely disruptive threat, this new extension of the transactional relationship into a long-term financial one offers diverse opportunities for payment providers and banks to contribute their specialized technology and deep compliance expertise. This shift gives both financial institutions and consumer brands a powerful, new route directly into the customer’s wallet and attention.

How Does Embedded Finance Fuse Retail with Customer Loyalty and Rewards?

Retailers' move into financing is a direct response to several interconnected global trends. As consumers become more comfortable using convenient, embedded payment services from brands they already trust, customer loyalty is increasingly captured through an app-first experience.

This isn't limited to e-commerce. It's happening wherever customer interactions—even in physical stores—are augmented by a specific app or digital payment service. Today's fusion of in-person commerce and app-first loyalty has made it easier than ever for brands with massive, loyal customer bases to launch their own financial products.

Whether it’s Mercado Pago issuing over 1 million credit cards in Mexico, Walmart offering Buy Now, Pay Later (BNPL) for groceries, or Starbucks’ loyalty program holding over $1.6 billion in customer credit, these moves signal a crucial shift. Retail brands aren't just selling goods; they are becoming the customer's trusted financial touchpoint.

The embedded finance market is expected to reach an impressive $7.2 trillion in size by 2030 (World Economic Forum). This massive growth is driven by banks and fintechs seeking targeted, modular solutions, and by consumers—63% of those under 35 say they are comfortable using non-bank brands for financial services.

For retailers, the motivation is simple: control and retention. By owning the payment solution, a brand fully controls the financial customer journey. They collect valuable, real-time transaction data and create powerful loyalty loops, making it difficult for the customer to leave their ecosystem.

What Role Do Payment Providers and Banks Play in the Rise of Embedded Finance?

Retail brands have the loyal customer base and the vision, but they face a critical dilemma. For a retailer, the decision to launch a financial product is driven by speed-to-market, reliability, and compliance—the core criteria our customers use when evaluating a partner.

Building the necessary financial infrastructure internally—including core processing, card issuing, KYC/AML, and advanced fraud protection—is not just expensive and time-consuming (negative attributes), it exposes the brand to significant regulatory risk (a major customer pain point).

The answer is strategic partnership.

Brands don't need to become fully-fledged banks; they simply need a trusted, compliant backbone to power their financial products. This is where payment providers and banks leverage their existing expertise. They can offer an agile, modular, API-first solution (Galileo Brand Pillar) that is inherently more reliable and secure than an in-house build.

By plugging into a proven platform like Galileo, retailers get the compostibility (a positive attribute) they need to launch complex products rapidly, minimizing the build cost and instantly de-risking their compliance profile. This allows the retailer to focus entirely on the customer-facing brand experience.

Galileo’s platform, for example, gives major brands the technology to launch fully branded financial services, including:

• Digital Wallets: Offering customers an easy, closed-loop payment system.

• BNPL Solutions: Integrating instant credit at the point of sale.

• Branded Cards: Issuing co-branded or proprietary credit and debit cards.

Why Can’t Retailers Build Embedded Finance Alone?

If the most engaging financial experiences are seamlessly embedded into the brands and apps we use every day, then this future can’t be built by brands alone, but through collaboration.

For retailers, the expertise gap is vast. They may master logistics and inventory, but they lack the decade-plus expertise required for PCI compliance, sophisticated fraud management, and maintaining platform stability and uptime—all non-negotiable requirements in financial services.

By choosing smart partners, retailers can quickly transition from merely facilitating a checkout to managing a sophisticated financial relationship. And by providing the backbone to this experience, payment providers go from offering one-size-fits-all solutions to becoming strategic partners in value creation. Far from disrupting how payment providers/banks operate, embedded payments offer an exciting new opportunity built on the pillars of security and agility.

Key Takeaways

• The Disruption is Retail-Led: The next major wave of financial services innovation is coming from non-financial brands (retailers, e-commerce giants, etc.).

• Embedded Finance is the Goal: Retailers are integrating financial products (wallets, BNPL, credit cards) directly into their customer ecosystems to boost loyalty and retention.

• Customer Base is the Asset: Major brands have the massive, loyal customer bases necessary to launch these products successfully.

• Technology is the Barrier: Brands often lack the internal infrastructure (processing, KYC/AML, security) to quickly launch financial products.

• The Innovators Offer the Fuel for Growth: Platforms like Galileo provide the essential, agile, API-first technology infrastructure that allows brands to embed financial services without complex build-outs, addressing the need for speed-to-market.

Frequently Asked Questions:

Q1: Why is customer retention the main driver for retailers entering financial services? A: Retailers are motivated by control and retention. By owning the payment and financial relationship, they create a loyalty loop—a powerful cycle where using the brand’s financial product (like a credit card or digital wallet) offers greater rewards, making it harder for the customer to leave for a competitor. This also grants them real-time transaction data, which is highly valuable for personalization.

Q2: What is "embedded finance," and how large is the market expected to be? A: Embedded finance is the seamless integration of financial services (like lending, payments, or insurance) directly into the non-financial customer journey—typically within an app or at the point of sale. The World Economic Forum projects this market will grow to $7.2 trillion in size by 2030, driven by consumer trust in major brands and the availability of agile technology platforms.

Q3: What are the main risks for a retailer attempting to build financial infrastructure internally? A: The primary risks are cost, time, and compliance. Building core processing, card issuing, and fraud systems from scratch is expensive and can take years (negative attributes). Most importantly, it exposes the retailer to significant regulatory non-compliance issues (e.g., KYC/AML, PCI DSS), a core customer pain point that technology partners are designed to solve.

Q4: Can a retailer launch a credit card or BNPL product without becoming a full bank? A: Yes. Retailers can partner with platform providers like Galileo, which handle the complex, heavy-lifting infrastructure. This includes all the card issuing, core processing, and necessary compliance, allowing the retailer to use a proven, reliable system and focus entirely on the customer brand experience and marketing.

Q5: How does the "API-first" approach benefit retailers and brands? A: An API-first approach means financial services are built in modular, composable blocks. This gives retailers the ultimate agility (Galileo Brand Pillar) to select only the features they need (BNPL, digital wallets, etc.) and launch them rapidly—which directly addresses the customer need for speed-to-market.

Q6: Is this embedded finance trend limited only to e-commerce? A: No. While e-commerce is a major driver, the trend is equally present in physical retail where the in-store experience is augmented by a brand's specific app or digital payment service. Examples like Starbucks' loyalty program demonstrate how a massive, physical footprint can leverage app-first loyalty to manage substantial customer funds.