In today’s financial services arena, embedded finance and banking-as-a-service (BaaS) have emerged as transformative forces, redefining the way banks and financial institutions (FIs) engage with consumers and businesses. At the core of this shift is the use of application programming interfaces (APIs), which enable smooth financial transactions through digital platforms.

A recent PYMNTS Intelligence report, “Embedded Finance and BaaS: From Marketing Buzz to Banking Bedrock,” in collaboration with NCR Voyix, reveals traditional institutions must now make a critical choice: adapt to these advancements to remain relevant or risk being surpassed by more nimble competitors.

APIs Transform Embedded Finance

Embedded finance and BaaS are becoming integral to the banking industry, driven by the need to offer seamless financial solutions and counter competitive threats from Big Tech and FinTech companies. According to recent surveys, 41% of FIs have already implemented embedded finance solutions, and 48% have expanded their BaaS capabilities. This adoption reflects a strategic shift toward leveraging these technologies to stay relevant in a market increasingly dominated by digital-first players.

A trend is that 79% of banks worldwide expect banking to become deeply embedded in daily consumer and commercial activities. As a response to this shift, 20% of banks are transitioning toward BaaS-centric models that enable them to offer a range of in-house financial products and services.

This strategic move is crucial, as businesses are integrating C systems with payment providers via APIs to gain data-driven insights, a trend anticipated to accelerate with advancements in artificial intelligence (AI).

Navigating Roadblocks to Embedded Finance

Despite the clear advantages, adopting embedded finance and BaaS presents challenges. In the U.K., for example, two-thirds of banking executives cite at least 10 obstacles, including cost and risk factors, that hinder the widespread adoption of embedded finance. A staggering 99% of executives acknowledge at least one barrier, with a substantial number highlighting the absence of a unified internal strategy as a major hurdle.

Meanwhile, the regulatory environment remains a critical issue. In the U.K., 31% of compliance leaders report being hampered by regulatory uncertainty, while broader concerns about outdated systems and the lack of cohesive strategies exacerbate the problem.

European banks face additional security challenges, with 80% acknowledging the importance of API security, but only 24% having implemented comprehensive security solutions. These issues are particularly pressing for smaller community banks and credit unions (CUs), which often struggle with legacy systems and limited resources.

FinTech Partnerships: Key to Banking Innovation

FinTech partnerships are emerging as essential for banks and FIs seeking to accelerate innovation and enhance customer satisfaction. These collaborations enable institutions to integrate advanced technologies and offer more responsive services, addressing evolving consumer needs and maintaining competitive edge.

A key driver of this shift is the demand from Generation Z. PYMNTS Intelligence research shows that 30% of Gen Z consumers are likely to switch financial institutions if their current ones fail to innovate. Despite this, 41% of CUs have no plans to offer popular digital services like Zelle by 2030, and 23% are not considering digital budgeting tools. This highlights a critical disconnect and underscores the urgency for CUs to adopt API-enabled products.

In response, 80% of CUs are recognizing the value of FinTech partnerships as a crucial element of their digital transformation strategy. Nearly half of these institutions plan to invest in FinTech collaborations in the near future, with about 30% expecting to partner with multiple FinTechs.

The rise of embedded finance and BaaS marks a shift in banking from traditional silos to a digital-first approach. Despite significant challenges, especially for smaller banks and credit unions, FinTech partnerships and API integrations offer a path forward.

LANSING, Mich. (WILX) – The ability to manage finances is a lifelong skill.

All Michigan high school freshmen are now getting a much-needed crash course in personal finance. Getting that knowledge early could lead to financial success later in life.

“It’s probably one of the most valuable classes any student can take in high school. I love teaching other classes, but this class is, I think probably really useful for life right off the bat,” said Lothar Konietzko who teaches personal finance at Waverly High School.

Konietzko says requiring Michigan students to take a personal finance course readies them to enter the real world, aware of how to manage their money and avoid debt.

“Get kids to be able to step out into the real world without hopefully making the financial mistakes that previous generations have made with their money management or mismanagement decisions,” said Konietzko.

Laura Lutterbeck, CFO for Junior Achievement of the Michigan Great Lakes says the organization spent the past year working with policymakers and educators to make the requirement possible. Helping schools build a program based on its needs.

“We often will partner with teachers who are providing what they might term as practical math, in some schools we partner with business teachers, career readiness teachers, it just depends on where that best fit is,” said Lutterbeck.

Dan Shanahan, bank manager with Eaton Community Bank has volunteered for several schools in Mid-Michigan. He says students learn the basics of what they need to know to handle their money.

“Budgeting and how to save and kind of pay yourself first. What is credit, how do you get a credit score, how do you earn credit, how do you make some mistakes that can cause bad credit,” said Shanahan.

Requiring a personal finance course helps all students build a foundation that leads to financial stability that lasts a lifetime.

Beginning this school year, all incoming freshmen will be required to take a semester-long course on personal finance for credit to walk the stage and receive their high school diploma.

Junior Achievement is always looking for additional volunteers to work in the schools to teach personal finance courses to students.

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No two roads to financial literacy are the same. Some learn lessons in school, some from parents, others through trial and error.

In this episode of “Financial Freestyle,” host Ross Mac is joined by Brandon Copeland, a former NFL player turned professor, author, and entrepreneur. Copeland, a 10-year NFL veteran, shares the motivation behind his financial literacy journey. “As I went into the league, it was all about startup capital,” explains Copeland. “It was all about how to take this opportunity to make some money and how to flip it.”

Copeland recounts his early experience with day trading, which he began during the early years of his NFL career. Armed with knowledge from his internship at UBS, he dives into the lessons learned, including a costly Nike-options trade that faltered due to geopolitical tensions in Greece. “I learned a tough lesson there, which was one don’t get greedy,” said Copeland. “I need to learn how to better understand leverage and de-risk some of my trades… I need to find things to invest in that I control.” That lesson ultimately led him to real estate investing.

Today, Copeland and his wife, Taylor Copeland, are the founders of BTC Investments, which is a real estate investment portfolio holding $203 million.

“Financial Freestyle with Ross Mac” on Yahoo Finance is dedicated to promoting economic prosperity for all. Through expert insights, practical advice, and inspiring success stories, we empower you to build and grow wealth. Join us on this transformative journey toward financial freedom and inclusive economic growth.

This post was written by John Tejada.