Beyond the Hype: The Evolution of Embedded Finance and Why Direct Relationships Matter
The embedded finance revolution isn’t slowing down. With B2B payments volumes projected to hit $7 trillion by 2026, we’re seeing a fundamental shift in how financial services are delivered. But beneath the impressive numbers and endless buzz about Banking-as-a-Service (BaaS), a crucial question has emerged: Are bank-fintech partnerships built on a foundation that can actually support this massive growth?
This post explores the evolution of embedded finance and why direct relationships are essential.
The Challenges with Traditional BaaS Models
The traditional BaaS model, built on layers of intermediaries between banks and fintechs, has revealed fundamental weaknesses. When systems with multiple intermediaries fail, the question of responsibility and accountability becomes critical. Recent high-profile incidents have exposed the serious flaws in these relationship models – and the results haven’t been pretty.
In one such failure, thousands of Americans saw their life savings vanish or were locked out of their accounts for extended periods due to discrepancies, reconciliation issues, and missing funds. When indirect relationships fail, the impact extends far beyond balance sheets and operational headaches—there are real people, facing real financial crises, on the other side of those numbers.
Regulators have responded decisively. New guidance places direct responsibility on banks, not intermediaries, for managing fintech partnerships. The message is crystal clear: banks must establish and maintain direct oversight of these relationships.
The era of arm’s-length partnerships is coming to an end.
The Victor Approach: True Direct Relationships
At Victor, we anticipated this industry shift. Our commitment to direct relationships isn’t just a business strategy— it’s our core belief. That’s why from day one we built our platform differently, focusing on genuine direct relationships between banks and their fintech partners.
As the industry evolves toward more direct solutions, we’ve been building a regulator friendly and compliant solution from the start with:
- Direct core integration and transparent ledgering that eliminates reconciliation nightmares and side-core complexities.
- Near real-time visibility into all transactions and account activity, enabling better risk management for banks.
- Stronger partnerships where banks always have full control over client selection and maintain direct oversight to meet regulatory demands.
The Power of Direct-to-Core
Through our partnership and integration with Jack Henry, we’re challenging the assumption that legacy banking systems cannot support modern fintech innovation.
Together we’ve created something unique in the industry: a patent-pending direct-to-core solution that extends legacy banking systems into the modern era.
When other providers rushed to rebrand their middleware solutions as ‘direct,’ we built a truly direct-to-core solution where every transaction, every balance, every update flows directly through the core. Eliminating the need for intermediate ledgers or reconciliation processes and creating a single source of truth that both banks and their fintech partners can trust.
Beyond Traditional Banking
Through our platform, banks can:
- Generate non-interest income from payment transactions.
- Grow deposits through innovative client solutions.
- Create new revenue streams.
- Expand offerings for existing clients.
- Future-proof their institution with modern APIs.
Whether it’s same-day payroll, instant gaming payouts, or real-time B2B payments, our platform ensures banks can deliver the speed and efficiency that modern businesses demand.
The Path Forward
The future of banking isn’t about adding more layers—it’s about removing the unnecessary ones. Through our Jack Henry integration and direct-to-core approach, we’re enabling banks to build sustainable, profitable fintech partnerships that can withstand regulatory scrutiny while driving innovation.
The question isn’t whether to move to direct relationships, but who will help you make the transition successfully.