Not Every Bank Needs to Become a Fintech Platform
I've spent years watching this space evolve, most recently from the inside at Cross River, and I want to say something that rarely makes headlines: most banks shouldn't try to become fintech platforms.
There's a new gold rush mentality spreading through banking right now, and the numbers make it easy to see why. Independent market research shows the embedded finance market is climbing toward a $454 billion valuation by 20311.
On top of that, with the passage of the GENIUS Act, digital assets now have a legitimate, regulated standing that banks can build a strategy around. Public data shows stablecoin market caps surpassing $317 billion2.
Industry commentary increasingly frames these two forces as existential imperatives, with more pressure being put on traditional banks to transform into fintech platforms in order to catch the wave.
But the same market dynamics powering growth are also creating brutal natural selection. The survivors will be the ones who build sustainable, risk-managed business models.
The math doesn't work for everyone
Margins across the embedded finance stack are tightening. Bain estimates that competition is cutting payment infrastructure fees nearly in half in 2026³. BNPL margins are shrinking. Point-of-sale lending is tightening. Banks trying to build platform economics on top of that are finding that the math gets harder every year3.
For a bank to justify the fixed costs of building or licensing platform infrastructure, real-time monitoring, API-first architecture, blockchain compliance capabilities, third-party risk programs across dozens of partners, the economics require sustained, high-volume throughput. For most institutions, those scale thresholds are difficult to reach.
Meanwhile, regulators are watching all of it. In July 2024, the Fed, OCC, and FDIC issued a joint statement making one thing permanently clear: using a fintech partner doesn't transfer your compliance responsibility4. It stays with the bank.
Every partner relationship lives inside a five-stage risk lifecycle: planning, due diligence, contracting, monitoring, and, sometimes, sadly, termination. For a bank running 50+ fintech partnerships, regulatory guidance implies hundreds of individual assessments annually, all ultimately accountable to the board.
Tapping into the embedded finance boom is a product decision. Moving to a platform model is a business model shift. Conflating the two is a strategic error.
The stablecoin market is narrower than it looks
The stablecoin opportunity is an area where the reality seems to be more concentrated than the hype. The primary movement in the banking sector is still centered within a very small group of early movers. For instance, a high-profile G7 multi-currency stablecoin pilot currently involves only ten of the world’s largest financial institutions9.
If institutions with massive compliance and technology budgets are proceeding carefully, smaller banks naturally face a much steeper climb.
There are alternative plays than going all in
Tapping into the embedded finance boom as a participant is a product decision. Moving to a platform model is a fundamental business shift. Conflating the two is a strategic error. Consider how the smartest institutional players are moving:
- BNY Mellon didn’t feel the need to issue its own stablecoin. Instead, they became the primary custodian for Ripple’s RLUSD reserves5 and handle cash for Circle’s USDC6.
- AMINA Bank in Switzerland took a similar route, focusing on custody and trading rather than issuance11.
Moves like this allowed these two banks to access the ecosystem without absorbing the full operational weight of running the entire infrastructure. For regional and community banks, vertical specialization can be the smarter play. Deep institutional expertise in healthcare, real estate, or logistics paired with the right software platforms create value that a generic "Banking-as-a-Service" provider can’t touch.
Rather than asking 'can we,' ask 'how best can we leverage our strengths?'
The real strategic question
The embedded finance boom is real. The numbers are consistent across research from Grand View Research7, Bain & Company3, and McKinsey8, all pointing to the same directional story. They also reveal the market is consolidating around institutions with specific advantages i.e., scale, institutional client bases, sophisticated and regulated compliance infrastructure, and the organizational depth to manage complex partner ecosystems.
For the 4,000+ banks10 in this country who are deciding whether to build a platform: the more strategic question is whether a platform model is the most effective way to tap into your existing expertise? Rather than asking “can we,” I suggest asking “how best can we leverage our strengths?”
The banks that come out ahead are those who focus, the ones that know which claim is worth staking, more importantly, have the discipline to walk past those that aren’t.
References
1 Embedded Finance Market Size & Forecast 2031
2 Stablecoins in 2025: Developments and Financial Stability Implications
3 Embedded Finance: What It Takes to Prosper in the New Value Chain
4 Joint Statement on Banks' Arrangements with Third Parties (July 2024)
5 Ripple Selects BNY to Custody Ripple USD Reserves
6 BNY Mellon Emerges as Bank of Choice for Stablecoin Reserves
7 Embedded Finance Market (2024 - 2030)
8 The stable door opens: How tokenized cash enables next-gen payments
9 Major banks explore issuing stablecoin pegged to G7 currencies
10 The U.S. has more banks than anywhere else on Earth, and it matters : NPR
