3 Ways Compliance Is Becoming an Unlock for Embedded Finance in B2B

Traditionally, compliance has been shorthand for constraint.

However, that’s never been the case across embedded finance, particularly across its promise to empower B2B platforms to offer payments, lending, insurance and treasury services directly inside their workflows.

B2B firms usually navigate a fragmented landscape. Unlike consumer FinTech, which benefits from more uniform federal oversight, B2B embedded finance often triggers commercial rules that vary by state. The definition of what constitutes money transmission, for example, remains notoriously inconsistent. Some states exempt payment processors handling funds incidental to a business service; others require full licensure if a platform so much as exercises control over settlement timing.

In lending, the line between a referral relationship and an activity requiring broker or loan-originator licensing differs in wording and enforcement. In insurance add-ons, such as invoice coverage or revenue protection products, ancillary services can veer into regulated territory.

As embedded finance matures, however, a pivot is underway. The companies gaining advantage are those reframing compliance not as a defensive shield but as a strategic engine. They are deepening partnerships with banks, investing in automated infrastructure, and building internal regulatory literacy as a core competency. In the process, they are working to turn one of the industry’s biggest liabilities into a durable moat.

Read also: How Embedded Finance, AI and Automation Are Redefining B2B Payment Networks

The Moving Target of B2B Financial Regulation

Compliance is no longer just a guardrail; it’s becoming the infrastructure that makes embedded finance scalable, defensible and trusted. For a vertical software-as-a-Service (SaaS) platform that embeds supplier payments, servicing a single invoice means touching identity verification, funds movement, fraud controls, dispute workflows and, depending on the product, credit extension.

The PYMNTS Intelligence report “Embedded Finance Grows Up: How Online Marketplaces Can Retain Customers and Boost Revenues” revealed that 81% of marketplaces face regulatory hurdles, making strong oversight and risk management the top criteria for embedded finance vendor selection.

Multiply that complexity across a customer base spanning dozens of states, and the compliance surface rapidly becomes unrecognizable from traditional FinTech models.

“In 2025, there is pretty much no compliance without AI because compliance became exponentially harder,” Alexander Statnikov, co-founder and CEO of Crosswise Risk Management, told PYMNTS in March. “Think about all the change management that happens with regulations. Now, states will be stepping in. How do you stay on top of it?”

The first major shift is happening in bank-FinTech relationships. Early embedded finance platforms often treated the bank partner as a back-end utility, responsible for maintaining the regulatory perimeter while the platform controlled customer experience. But as regulatory responsibilities expand, platforms are finding that a transactional relationship is no longer enough. They need banks that not only sponsor accounts but also collaborate on product design, risk modeling, dispute procedures and licensing strategies, actively creating more resilient architectures.

The shift can be most visible in treasury and payments products. For example, a software platform offering embedded supplier payments may need approval for how it manages sub-accounts, handles float or structures escrow-like services.

At the same time, banks, for their part, are recognizing that the quality of FinTech partners affects their own regulatory exposure. After several high-profile supervisory actions scrutinizing bank-FinTech arrangements, institutions are more selective, more embedded and more operationally involved. The result is a new category of partnership that is collaborative, risk-aligned and structurally integrated.

See also: APIs and Points of Vulnerability Spotlight BaaS Risks as Platforms Evolve

Automation Moves Compliance From Manual Burden to Advantage

The second unlock is technological. Historically, compliance operations relied on manual review queues, spreadsheets and a constellation of point solutions that seldom communicated cleanly. Embedded finance breaks that model. Platforms processing B2B-sized payment amounts daily cannot afford compliance architectures that scale linearly with headcount, or that expose them to inconsistent decision-making across regulatory regimes.

Instead of maintaining brittle manual decision trees, automated systems ingest regulatory logic as modular parameters. If California updates its rules governing commercial financing disclosures, or New York sharpens expectations around transaction reporting, a platform can update its rules engine without re-architecting the entire workflow.

Automation also enables granularity. A platform that serves construction suppliers in Louisiana, manufacturers in Michigan and professional services firms in Massachusetts can build jurisdiction-specific logic for onboarding, monitoring, financing and payouts, all while presenting a unified user experience to customers. This precision would be impossible with purely manual operations.

The third unlock is cultural. As embedded finance reaches deeper into core business workflows, the companies poised to win are those treating regulatory literacy as an organizational competency.

Platforms treating compliance as a strategy begin to see regulatory expertise as a moat. They can design products that competitors cannot launch quickly. They can negotiate more collaborative arrangements with banks. They can speak the language of regulators during examinations, building trust that translates into smoother operations and fewer surprises. And they can anticipate where the regulatory frontier is moving, particularly as states experiment with new frameworks governing digital wallets, instant payments, commercial financing disclosures and platform liability.

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