Open banking ≠ embedded finance
Embedded finance is the pattern of non-banks offering banking-like products (accounts, cards, lending, payroll, insurance) through APIs. Open banking is one of the regulated plumbing layers an embedded finance product can sit on, but you can build embedded finance without ever touching open banking, and you can use open banking with no embedded finance product in sight. The financial-data-connectivity layer (Plaid, TrueLayer, Codat, Apideck) sits in the middle and connects the two.
The embedded finance stack, in three layers
Reading top to bottom: products visible to end users, the connectivity APIs that feed them data, and the regulated plumbing the connectivity itself runs on.
Layer 1 — Embedded finance products (the visible top of the stack)
Embedded finance is the pattern of putting financial products inside non-financial software: the Shopify checkout that issues a corporate card, the gig-work platform that runs payroll, the construction SaaS that funds invoices. Non-banks ship the experience; specialised providers ship the regulated infrastructure underneath.
We track 251+ providers across 15 product categories: BaaS (Unit, Treasury Prime, Swan), card issuing (Marqeta, Lithic, Stripe Issuing), embedded payments (Stripe Connect, Adyen for Platforms), lending (Kanmon, Parafin), payroll (Check, Gusto Embedded), compliance (Persona, Alloy), insurance (Cover Genius, bolttech), and more.
None of these companies require open banking to operate. A BaaS-issued debit card runs on a sponsor bank and the card networks. An embedded-payroll product runs on tax-engine APIs and ACH rails. Open banking is one of several rails they can choose to use.
Layer 2 — Financial data connectivity (the foundational middle)
The connectivity layer is the set of API platforms that move structured financial data — bank transactions, accounting ledgers, payroll history, identity, ERP records — between source systems and whichever product needs them, with the customer's consent. It is its own business: Plaid alone reached a $13B+ peak valuation on connectivity, with no embedded-finance products of its own. Codat got acquired by Visa, Finicity by Mastercard, Tink by Visa — all pure-play connectivity exits.
We list this as a 16th “foundational” category on the directory because it does not fit cleanly inside the 15 product categories — these providers are not the embedded product, they are what lets the product reach the customer's data. Examples by sub-vertical:
- Bank accounts: Plaid, TrueLayer, Tink, Yapily, MX, Yodlee, Finicity (now Mastercard Open Banking), Atomic, Method.
- Accounting / ERP: Codat, Rutter, Apideck.
- HR / payroll: Finch.
- Multi-vertical SaaS: Merge, Apideck, Chift.
- Wallet / consumer-money: Klarna Kosma.
On the bank-account side, this layer often runs on top of open banking standards (PSD2, CFPB 1033, FDX) — but it abstracts them into a single SDK so the embedded-finance product above does not need to know which bank uses which API.
Layer 3 — Plumbing (rails, regulation, sponsor banks)
Below connectivity sits the genuinely regulated infrastructure: the rails the money or data actually moves on, and the licences that authorise it.
- Open banking — PSD2 in the EU, the UK Open Banking Standard, CFPB Section 1033 in the US, FDX as the US technical standard, Australia's CDR, India's Account Aggregator framework, Brazil's Open Finance.
- Payment rails — ACH, SEPA, Faster Payments, RTP, FedNow, the card networks.
- Sponsor banks — chartered banks that hold deposits and issue cards on behalf of fintechs.
- Identity & KYC sources — credit bureaus, government ID databases, sanction lists.
An embedded finance product can pick which plumbing it wants to use: open banking for account verification, ACH for payouts, a sponsor bank for card issuing. The choice depends on geography, regulation, and product economics.
Rule of thumb: where does X belong?
- Issues cards, holds deposits, originates loans, runs payroll, sells insurance? → Layer 1, embedded finance product.
- Connects an app to bank accounts, accounting systems, or payroll providers via one API? → Layer 2, connectivity.
- Is a regulation, network, scheme, or licensed bank? → Layer 3, plumbing.
- Calls itself “open banking”? → almost always Layer 3 (the standard) or Layer 2 (an aggregator built on it). Almost never Layer 1.
FAQ
What is the difference between open banking and embedded finance?
Embedded finance is the pattern of non-banks offering financial products (accounts, cards, lending, payroll, insurance) inside their own apps via APIs. Open banking is a regulated framework — PSD2 in the EU, the UK Open Banking Standard, CFPB Section 1033 in the US — that lets licensed third parties read account data and initiate payments with the customer's consent. Embedded finance is the product layer; open banking is one of the rails the product can run on.
Is Plaid an embedded finance company?
Plaid is a financial-data-connectivity company, not an embedded finance company. It links bank accounts to apps so other products can read transactions or initiate payments. Plaid sits on top of open banking (CFPB 1033 in the US, PSD2 in the UK and EU) and underneath every embedded-finance product that needs bank-account context. The same applies to TrueLayer, Tink, Yapily, MX, Yodlee, Finicity, Codat and Apideck.
Do you need open banking to build an embedded finance product?
No. Many embedded finance products never touch open banking. A BaaS-issued debit card runs on a sponsor bank and the card networks. An embedded payroll product runs on tax-engine and ACH/SEPA infrastructure. Open banking is one option for the plumbing — useful when you need to read a customer's bank balance, initiate a pay-by-bank transfer, or verify income — but it is not a prerequisite.
Is open banking part of embedded finance?
Open banking is a regulatory and technical framework, not a product category inside embedded finance. The relationship is the other way around: embedded finance products can use open banking APIs (directly, or through aggregators like Plaid and TrueLayer) as one of their plumbing layers. Many embedded finance products use no open banking at all.
Where does Apideck fit in?
Apideck is a unified API platform — it sits in the financial-data-connectivity layer, like Plaid, but for accounting, CRM, HRIS, and ERP systems instead of bank accounts. An embedded finance product (say, an embedded-lending platform that needs the borrower's QuickBooks data) can connect to Apideck once and reach 200+ underlying SaaS apps without building one-off integrations.
What is the financial-data-connectivity layer?
It is the layer of API platforms that pull structured financial data — bank transactions, accounting ledgers, payroll history, identity, ERP records — out of the source system and hand it to whichever product needs it, with the user's consent. Examples: Plaid, TrueLayer, Tink, Yapily, MX, Yodlee, Finicity (bank accounts); Codat, Apideck, Rutter, Merge (accounting / SaaS); Finch (HR / payroll). It is its own business: Plaid alone reached a $13B+ valuation purely on connectivity, with no embedded-finance products of its own.