Beyond the Checkout Button

How embedded finance is reshaping brand risk, regulation, and responsibility

Jul 17, 2025

Embedded finance is no longer optional. It’s now a core feature of modern retail strategy, spanning payments, credit, insurance, and beyond.
Brand risk is growing. When financial products go wrong, customers don’t blame your partners. They blame you.
Regulatory pressure is rising. New rules in the UK, EU, and Australia are tightening expectations for how financial services are marketed and delivered, even by non-financial brands.
Traditional risk models aren’t enough. Embedded finance requires new playbooks for vendor due diligence, customer support, governance, and compliance.
Strategic accountability matters. Retailers must treat financial features like infrastructure, not just UX. That means building cross-functional ownership from day one.

The rise of embedded finance in retail

Embedded finance isn’t new, but in 2025, it’s everywhere. Buy-now-pay-later options appear at nearly every checkout. Retailers offer their own branded insurance. Gym memberships come with lending plans. Travel sites sell financial protection products bundled with experiences. What used to be the exclusive domain of banks and insurers is now baked directly into the customer journey, often without the customer—or the company—fully realising it.

For retailers and digital brands, embedding financial products has unlocked powerful new growth levers. It promises better margins, deeper engagement, and control over more of the customer experience. But that control comes at a price. Financial products carry weight—legal, operational, and reputational. And as brands take on more responsibility for the financial well-being of their customers, the line between commerce and finance is starting to blur.

This shift is a structural transformation. And like any transformation, it brings risk, often where it’s least expected.

Why brands are embracing embedded finance

Retailers didn’t wake up one day wanting to be banks. They were pulled into this space by customer expectations, fintech innovation, and the search for new margin in competitive markets.

At the front end, it’s about customer experience. Offering credit at checkout reduces friction and boosts conversions. A flexible payment option increases basket size. Branded insurance builds peace of mind (and another touchpoint). For digital-native consumers, seamless financial features feel like the minimum standard to even compete.

At the back end, it’s about strategy. Embedded finance provides a new source of income that doesn’t rely on moving more units. It gives access to richer customer data. It allows brands to shape the entire transaction ecosystem rather than just playing in it.

A few examples:

A fashion giant like ASOS integrates BNPL options from Klarna and Clearpay directly into its checkout flow, offering customers four interest-free instalments and earning a slice of the margin on each transaction. For ASOS’s millennial and Gen Z shoppers, it’s fast, frictionless, and expected.
An electronics retailer like JB Hi-Fi bundles accidental damage and theft protection into an upsell at checkout. The cover is underwritten by a third party but branded entirely as JB Hi-Fi’s own “Extended Care Plan,” reinforcing the brand relationship while quietly outsourcing the risk.
A travel platform like Booking.com embeds multi-currency wallets, flexible payment options, and insurance cover directly into its booking engine. From the customer’s perspective, it’s all Booking.com, but behind the scenes, providers like Cover Genius and Adyen do the heavy lifting.

The logic is sound. The market is growing. And for many brands, the financial layer is becoming a core part of their value proposition. But there’s a catch.

The hidden risk transfer

Embedded finance adds features, but it also shifts responsibility. For many retailers, that shift is happening faster than their risk posture is evolving.

1. Reputational contagion

Customers don’t distinguish between your brand and your fintech partner. If something goes wrong, they come to you. That reputational spillover is one of the defining challenges of embedded finance. More on that below.

2. Regulatory proximity

Just because you’re not a bank doesn’t mean you’re safe from financial regulation. In fact, regulators in multiple jurisdictions are making it clear: if you distribute financial products—even indirectly—you may have obligations around disclosures, conduct, data protection, and more.

Brands are finding themselves pulled into compliance conversations they never expected. Questions about suitability, affordability, KYC, and AML are becoming boardroom issues.

3. Operational risk by proxy

Every integration is a dependency. If your embedded finance partner goes down, delays payments, or suffers a breach, the customer comes to you. You may have the slickest front end, but if the plumbing fails, the fallout hits your support lines and brand equity.

Even more concerning is what happens when a payments provider enters administration. Recent investigations in the UK have shown that the insolvency of electronic money and payment institutions can leave retailers unable to access cleared funds for weeks, despite regulatory safeguards. The legal frameworks are improving, but when funds are frozen and customers start asking questions, contracts and compliance offer little comfort in the moment. Trust suffers. And the retailer wears the blame.

Regulatory landscape: 2025 and beyond

The embedded finance boom has caught the attention of regulators, and not in a good way. What started as a grey zone is rapidly becoming a patchwork of emerging obligations, enforcement actions, and shifting expectations across jurisdictions.

United Kingdom: The FCA steps in

The FCA’s Consumer Duty is now fully in force, raising the bar on how all firms—banks or not—distribute financial products. That means clearer disclosures, fair terms, and stronger support, even when finance is embedded in retail checkouts or mobile apps. The regulator has flagged concerns with how BNPL is marketed, especially around affordability. Recent consultations signal a push for greater accountability for distributors, not just providers.

European Union: DORA and beyond

The Digital Operational Resilience Act (DORA) took effect in January 2025, bringing tougher standards for cyber risk, incident reporting, and third-party resilience. While aimed at financial institutions, DORA also captures critical ICT providers—including those powering embedded finance. Retailers may find themselves in scope if they hold sensitive data or brand a financial service delivered by one of these providers.

Australia: financial product distribution under licence

As of June 2025, BNPL is regulated as consumer credit in Australia. That means licensing, responsible lending checks, and disclosure rules now apply, even when products are embedded via partnerships. ASIC has made it clear: under the Design and Distribution Obligations (DDO) regime, product issuers can be held responsible for how and where their products are sold, including through non-financial brands.

Global direction: function over form

The direction is clear: regulators are becoming channel-agnostic. It doesn’t matter if the financial product is offered via an app, a checkout page, or a chatbot. If it walks like a financial service and talks like a financial service, the regulatory expectations will follow.

The financialisation of the brand

Embedded finance is changing what it means to be a brand in 2025. Selling goods or services now often means facilitating financial transactions, protecting customer assets, and delivering trust at a whole new level.

Are you a retailer or a fintech platform?

Many consumer brands now straddle both. That comes with strategic complexity. You’re responsible for an experience, a product, and now a financial outcome. The deeper the integration, the harder it becomes to disentangle where the commerce ends and the finance begins.

And with every white-labelled product—BNPL, insurance, prepaid cards—you take on a slice of perceived responsibility for the financial wellbeing of your customer. Even if your contractual liability is limited, your reputational liability isn’t.

Brand Risk Is Shared Risk

When a customer clicks “4 easy payments” or “add protection,” they’re not thinking about your fintech partner. They’re thinking about you. Even if the service is powered by a third party, the trust is yours to win—or lose.

That’s why embedded finance carries invisible accountability: you may not design the financial product, underwrite the risk, or manage the claims process, but if something goes wrong, your brand wears it. The more seamless the integration, the more likely customers will hold you responsible for the financial experience. That’s not a glitch. It’s a feature of modern brand loyalty.

This is especially important when marketing and product teams are leading the charge. Their goals—conversion, engagement, customer stickiness—don’t always align with what’s required to safely deliver financial products.

Financial services aren’t just UX decisions or clever upsells. They’re regulated, high-stakes offerings that require deep operational readiness, governance, and customer protections.

Redefining risk management for embedded finance

Traditional retail risk models aren’t built for this. Most brands assess suppliers through a lens of service delivery, brand fit, and IT security. But embedded finance calls for a different lens—one drawn from banking, insurance, and financial services.

Why the old model breaks down

A software provider going down might mean disruption.
A BNPL provider going down might mean cashflow chaos, refund disputes, and media fallout.

Today’s risk extends beyond IT hygiene to include product design, complaint handling, and regulatory alignment. Most brand-side risk teams don’t have that playbook—yet.

Emerging best practices

Fintech-specific due diligence
Go beyond the SLA. Ask about underwriting models, KYC processes, claims ratios, dispute policies, and their compliance record with regulators. If you’re branding the product, you’re borrowing their track record.
Contracts that share risk, not just revenue
Build in indemnities, notification clauses for regulatory issues, joint response protocols for complaints, and clear responsibilities for refund and dispute resolution. Assume failure. Design for containment.
Integrated monitoring and governance
Don’t just do a vendor review at onboarding. Treat the fintech layer like critical infrastructure: ongoing audits, embedded dashboards, early-warning signals.
Customer support preparedness
Your support team is the first line of defence. If they can’t explain the product, resolve a payment issue, or escalate a claim properly, you’re not just failing a customer, you’re potentially breaching duty-of-care expectations.
Board oversight
Embedding finance introduces a strategic layer that touches governance, compliance, and brand trust, not just customer experience. Make sure it’s on the risk register and governance agenda at the highest level.

What leaders should do now

What once felt like a growth experiment has become part of many brands’ core operating stack. With that comes responsibility. For executives, the question is no longer if this is a risk but how well your organisation is set up to manage it.

Strategic actions to take

1. Map your exposure

Start with an audit. Identify where and how financial services are embedded in your customer journey. This includes:

BNPL and point-of-sale credit
White-labelled insurance or protection products
Wallets, prepaid cards, loyalty points-as-currency
Anything that involves financial data, customer funds, or regulatory touchpoints

2. Involve legal and compliance early

In fast-moving teams, it’s easy for legal and compliance to be brought in late—sometimes only once contracts are being finalised. But financial products carry regulatory implications that may not be obvious upfront. Involving legal early—during feature design or partner selection—can prevent costly delays, rework, or unintended exposure.

3. Review contracts with risk in mind

Look beyond commercials. Do your agreements clearly define:

Liability in the event of complaints, refunds, or financial harm?
Regulatory breach reporting?
Data-sharing protocols and obligations under GDPR, CCPA, or similar laws?
Dispute resolution and shared customer support responsibilities?

4. Pressure-test your customer journey

Mystery-shop your own flow. Ask: if something goes wrong, how easy is it for a customer to find help, lodge a complaint, or understand who is responsible? The more invisible your partner is, the more visible your responsibility becomes.

5. Engage with regulators proactively

Lifting your head above the parapet feels risky, but it’s also a marker of operational maturity and foresight. Many regulators are still shaping their response to embedded finance. Engage early to show you’re taking customer outcomes and compliance seriously. It can shape the tone of any future conversations.

Embedded, exposed, and evolving

Retailers now play an active role in their customers’ financial journeys, often without fully realising how much that responsibility has grown. Embedded finance offers undeniable upside. It unlocks revenue. It deepens relationships. It redefines what a brand can be.

But it also carries weight.

In a world where the checkout is a bank, the returns process is an insurance claim, and the loyalty program looks like a financial portfolio, the risks are no longer theoretical. They’re structural. They’re shared. And they’re yours.

The winners in this next phase won’t just be the fastest movers or the most innovative integrators. They’ll be the brands that recognise embedded finance for what it really is: a shift in responsibility. And they’ll respond not just with excitement but with strategy, governance, and care.