In the push to bring banking services to merchants’ platforms via embedded finance, core provider Fiserv has lacked one thing: a holistic vision of users’ finances.

That component fell into place recently as Fiserv unpacked the capabilities of Finxact, a core bank ledger provider the financial giant acquired last year for $650 million. 

“We bought Finxact to advance open banking, and as we looked further under the hood, we realized its potential to look across a merchant’s payment flows to create more personalized digital banking services via embedded finance,” said Sunil Sachdev, a longtime Fiserv executive who assumed the new title of head of embedded finance in July.

Using Finxact’s cloud-based account-aggregation tools in combination with the digital commerce capabilities of its Carat arm, Fiserv acts as a hub connecting sponsor banks to merchants who may offer loans, card-issuing and loyalty programs through their own platforms and apps, according to Sachdev.

Jacksonville, Florida-based Fiserv initially is pitching its embedded finance tools to independent software vendors serving merchants in industries such as e-commerce, health care, logistics and travel, he said.

“Many [Software-as-a-Service] firms already handle payment acceptance and processing for businesses in various niches, but as the revenue for those services gets compressed, merchant software platforms are looking for other ways to grow,” Sachdev said.

For example, a medical practice management software provider could tap Fiserv’s embedded finance approach to offer loans and card-issuing services for doctors’ offices using a streamlined set of application program interfaces.

“Fiserv is enabling clients to embed financial services through myriad traditional and non-traditional channels such as software platforms, marketplaces and merchant wallets,” Sachdev said. Finxact also speeds up payment-settlement processes and helps financial institutions tap into new channels of deposits and fee revenue, Sachdev said. 

The first customer integrating with Fiserv’s embedded finance service is Pay Theory, a Cincinnati-based e-commerce payment platform provider serving SaaS vendors in education, health care and youth-sports businesses that receive funds from government agencies and other highly regulated payers, according to Fiserv. 

“Customers like Pay Theory using embedded finance from Fiserv will have the ability to expand value that would otherwise be trapped across different payment methods with limited fungibility,” Sachdev said, declining to name the sponsor bank working with Pay Theory.

Fiserv is working with multiple sponsor banks that plan to act as partners for software platform providers. Pathward Bank, based in Sioux Falls, South Dakota, with $7.5 billion in assets, is one of Fiserv’s potential sponsor banks, he said, though he didn’t name Pathward’s merchant partners for embedded finance deployments.

In the emerging embedded finance arena, Fiserv faces competition from a range of financial infrastructure providers that have some of the same advantages of serving merchants, acquirers and banks, said Zil Bareisis, who heads Celent’s retail banking and payments practice.

It’s increasingly common for banks and fintechs like Marqeta to provide digitally based embedded finance for merchants, but it’s generally new territory for payments platforms like Fiserv, Bareisis wrote in a recent report.

“For payments companies like Stripe, Adyen or FIS and Fiserv, enabling [merchant] clients to offer Uber-like payment experiences is a huge opportunity,” he wrote. 

For players like Fiserv, competitive differentiation will come from the ease of use or flexibility of the underlying technology platform, Bareisis added.

Sachdev says Fiserv’s key advantage over other embedded finance providers is the size of its ecosystem.

“We’re one of the largest core banking providers, one of the largest merchant acquirers and one of the largest issuer-processors, plus we have relationships with close to 1,000 firms offering vertical software, and each of those firms has a lot of merchants, which creates a very large radius for our embedded payments,” he said. “With Finxact, we are stitching all of this together so businesses can consume financial services directly from a business’ platform.”