- A partner bank for embedded payments needs to bring proven rails with robust controls, but you also need expert guidance for governance and payment risk management.
- Embedded payments compliance is not optional. Your ability to scale depends on it.
- Not all embedded payments providers offer a bank-grade solution. When you’re evaluating a partner bank, there are key questions to ask.
In Part 1 of this series, we covered seven reasons embedded payments can be a powerful business driver. Here in Part 2, we focus on how scaling companies can optimize payment risk management and regulatory compliance by partnering with a bank that can support their growth.
Embedded payments can expand what your business offers, but also what your business is accountable for. Enabling payment flows within your platform brings new responsibilities for embedded payments compliance, fraud prevention and data security. You’ll need a risk-aware and compliance-first infrastructure that equips you with real-time oversight and audit-ready reporting, backed by expert support.
Why consider embedded payments?
Embedded payments can deliver tremendous business value across many use cases. For example, in working with clients at SVB, we see a wide range of opportunities:
- Fintech companies can embed payment capabilities for Bill Pay, Accounts Receivable (AR) automation, cross-border payments directly into their app or platform.
- e-Commerce platforms can offer customers new payment options like instant payments and Buy Now, Pay Later (BNPL).
- Marketplaces and other acquirer models can offer payment facilitation (PayFac) via embedded merchant services.
- Fintechs, e-commerce, B2B SaaS, and internet businesses can move money on behalf of corporate customers.
To take advantage of these opportunities, businesses need to understand and effectively manage the risks.
How complex are the risks?
A healthy financial ecosystem relies on transparency between banks, fintechs, and end customers. It also needs to satisfy regulators. Everyone needs a clear understanding of their roles and responsibilities to ensure compliance and improve payment risk management.
When you embed money movement, your business inherits new responsibilities and regulatory scrutiny. And it’s a big challenge. 93% of fintechs reported difficulties in remaining compliant, and 55% cited a lack of compliance automation that hinders their ability to meet regulatory requirements.
Compliance risk can escalate quickly if enterprise customers, auditors or regulators start asking questions. It’s critical that your operating model and records for embedded payments clearly identify some fundamentals, including:
- Who owns the funds (for payments sent and received). You need separate account structures and ledgers for your embedded payment clients, to ensure (and document) that their funds are not co-mingled with your own operating accounts. The right solution enables clear identification of the beneficial owner of the funds at any point in time in the lifecycle of the payment.
- Who is transmitting the funds. Most fintechs acting as money transmitters must be licensed (in any U.S. state where the business operates). Depending on the business model and embedded payments solution, some companies may be exempt from licensing, or their bank partner will manage money transmission. A strong partner bank also ensures payments adhere to regulations and payment network rules and enables your business to maintain detailed audit trails.
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How funds are safeguarded. Preventing fraud and safeguarding data requires stringent capabilities to avoid losses and regulatory risk. For example, you need tight controls to prevent money laundering and the financing of terrorist activity (BSA/AML and OFAC), data privacy and reporting, and third-party risk management. When you consider that fines for non-compliance with AML regulations totaled $4.6 billion in 2024, having a bank-grade embedded payment solution is business-critical.
Not all providers offer the robust infrastructure and expertise you can get with an embedded payments banking partner like SVB, so it’s essential to evaluate capabilities carefully.
Does your embedded payments use case have hidden risks?
Embedded payments compliance matters in every program, but the risk profile varies based on your use case. The more complex your fund flows, counterparties and oversight requirements, the higher the risk. Earlier we explained risk considerations that apply to everyone, and here are a few additional scenarios that can increase risk:
- Cross-border payments add another layer of complexity. Prepare for heightened risk of sanctions, country-specific regulatory requirements, expectations for foreign exchange transparency, and the need to support investigations and traceability.
- Marketplace and PayFac models concentrate risk in a different way, because you’re onboarding and monitoring large volumes of sub-merchants. You take on new responsibilities tied to underwriting, prohibited categories, settlement controls, reserves and holds, and ongoing monitoring.
Consider how your risk profile can shift in this example: Your marketplace expands from one payout flow to multiple payment rails and schedules, including new options like instant payments and stablecoins. At the same time, you expand the ability to support international sellers. Your platform looks the same to end users, but operationally your company just multiplied its requirements for compliance, monitoring, exception handling, and reconciliation.
Why a compliance-first partner bank should be top priority
A partner bank for embedded payments can enable you to access multiple rails via API integration, but what you really need goes beyond technology. You’ll also want controls for real-time oversight and robust reporting, backed by a bank’s domain expertise. It helps your program stand up to audits, enterprise client reviews, and investor due diligence. Your business still owns day-to-day operations, but the right embedded payments banking partner gives you the capabilities and compliance support to be successful.
We advise clients to prioritize strong KYB and KYC workflows. When you evaluate an embedded payments provider, make sure they can deliver the level of support you’ll need. At SVB, for example, we can provide guidance on industry standards to help you strengthen payment risk management processes for compliance monitoring, sanctions screening, reporting and governance. We also enable account structures that are tailored to your use cases, business models, funds flows and anticipated future growth.
How to get started with embedded payments
As your company considers embedded payments at scale, start with healthy skepticism and pressure-test the fundamentals before you build. We advise clients to follow some best practices:
- Get clear on what fund flows you will embed, whether it’s collections, payouts, bill pay, cross-border payments, or a mix. And be explicit about whose money is moving at each step, whether it is yours, your customer’s, or third-party funds.
- Look ahead to where you will operate next. New states, new countries and new customer segments can change your requirements quickly.
- Decide who owns ongoing compliance operations, not only onboarding but also monitoring, escalations, and audit response. Make sure you have an exceptions and dispute playbook for the scenarios that happen at scale, including failed payments, refunds, duplicate payouts, mistaken payouts, and account changes.
Done well, embedded payments becomes a durable and competitive advantage. By enabling faster cash movement and frictionless operations, your business delivers a customer experience that earns trust as you scale.
Our SVB team has deep experience in working with companies from seed to Series A and beyond. Learn more about how our embedded payments solutions can help you drive growth and revenue.
Frequently Asked Questions
What resources are available to better understand embedded payments?
To support your embedded payments journey, there are many resources such as Payment Alliances, trade groups and conferences. SVB clients can also gain free access to training and resources available through The Clearing House Payments Authority.
What should we evaluate a partner bank for embedded payments beyond the API?
APIs for embedded payments are only the entry point. You also need to understand how the provider supports onboarding and verification, ongoing monitoring, exception handling, disputes, and reconciliation. Also look at the available payment rails you can access, and level of support they provide for compliance, risk management, and training. The best fit is often an embedded payments banking partner that understands your business models, and can scale with your volume, use cases and expansion plans.
What makes a partner bank different from a payments provider?
Beyond APIs, a partner bank for embedded payments provides direct access to regulated payment rails, backed by support for governance and compliance. Along with the technology, look for a bank that provides expert guidance to help you meet regulatory obligations and scale safely.
What are early warning signs that embedded payments compliance may not scale?
Manual KYC/KYB checks, delays in exception handling, or fragmented reconciliation reports often signal gaps that will grow as volume increases.
How can a bank partner help reduce regulatory risk?
A strong bank partner for embedded payment solutions provides monitoring tools, clear governance documentation, and a compliance framework that helps your program meet audit and investor standards.
