How Third-Party Access Controls Power the Future of Embedded Finance

Read full article from Ping Identity here:  https://www.pingidentity.com/en/resources/blog/post/secure-third-party-access.html/?utm_source=nhimg

The rise of embedded finance is transforming how people interact with money. By integrating financial products directly into non-financial platforms, businesses can offer seamless customer experiences — from “buy now, pay later” to in-app insurance and instant credit approval.

The numbers tell the story. In 2021, embedded finance represented $2.6 trillion in U.S. financial transactions.¹ By 2026, it’s expected to exceed $7 trillion, accounting for over 10% of all U.S. financial activity.¹ Globally, the market will likely hit $348.8 billion by 2029, with a CAGR of 30%.² In Europe alone, embedded finance revenues are projected to surpass €100 billion by 2030.³

While this growth is promising, it introduces a new frontier of identity, access, and governance challenges. Every partnership between financial institutions and fintechs, merchants, or service providers creates an extended digital trust boundary — one that can easily be breached if not properly managed.

The Identity Challenge at the Core of Embedded Finance

Delivering embedded finance securely means granting controlled, auditable access to a wide network of external entities — from fintech partners to brokers, advisors, and technology vendors. Unlike traditional employee or customer access, third-party access is multi-layered, dynamic, and difficult to govern.

1. Scale and Complexity

A single bank may manage thousands of direct third-party relationships, each with its own dependencies. For every 100 vendors, research shows organizations could be indirectly exposed to 6,000+ sub-entities.⁴ This sprawling ecosystem creates an invisible risk chain that traditional IAM systems cannot effectively monitor or control.

2. Escalating Third-Party Risk

• 98% of organizations work with a third-party that has suffered a data breach.⁵
• 54% have been directly affected by one.⁶
• 63% of breaches⁷ are linked to over-permissioned or unnecessary third-party access.
• **40%**⁸ involve compromised credentials.

Misconfigured APIs, inactive accounts, and weak credentials continue to be the primary infiltration paths. Without visibility into downstream partners, institutions cannot confidently prove compliance or prevent insider misuse.

3. Operational Friction

Manual onboarding and fragmented systems slow innovation. Many institutions still rely on paper-based validation or email approvals to grant access — processes that take weeks or months. Without automated lifecycle management, deprovisioning often lags behind contract changes, exposing sensitive data and violating compliance rules.

To scale securely, the entire identity model for embedded finance must evolve from static user management to dynamic trust orchestration.

Industry Deep Dive: Where Identity Friction Hurts the Most

Banking: Balancing Speed with Security

Fintech partnerships power embedded banking — but every API connection and delegated credential increases exposure.
Banks face a constant trade-off: speed-to-market vs. security exposure.

• Too slow, and commercial opportunities vanish.
• Too fast, and the institution risks API misconfigurations and data leaks.

Uniform security policies often fail to reflect each partner’s risk profile, leading to over-permissioning and inconsistent access. A unified identity strategy ensures partners get just-enough access, without undermining regulatory compliance or data protection.

Insurance: Scaling Access Without Losing Control

Insurers depend on complex partner ecosystems — brokers, MGAs, TPAs, reinsurers, and benefits providers. Each stakeholder requires varying levels of access to claims systems, policy portals, and customer databases.

However, legacy IAM tools often lack visibility into subcontractor access chains. With the Digital Operational Resilience Act (DORA) now in force across the E.U. (January 2025), insurers must demonstrate full traceability of third-, fourth-, and Nth-party access. Manual processes simply can’t meet these new regulatory demands.

Wealth Management: Delegated Access Meets Regulatory Sensitivity

Wealth management ecosystems are rich in sensitive client data and rely on hierarchical delegation (firm → advisor → client).
Legacy IAM systems built for static workforces can’t support:

• Firm-level vs. user-level access control
• Multi-tenant delegation
• Regional regulatory enforcement (e.g., FCA, SEC, ESMA)

This results in compliance blind spots and audit deficiencies. Modern IAM must support dynamic, relationship-based access control that reflects real-world organizational structures.

Why Legacy IAM Tools Fail

Legacy IAM systems were never designed for embedded finance.

• Workforce IAM is tied to HR systems — perfect for employees, not for multi-organization partnerships.
• Customer IAM (CIAM) handles large user volumes, but not hierarchical, delegated access between companies.

The gap leaves financial institutions juggling custom code, manual reviews, and policy sprawl just to manage partner access. This outdated model cannot support continuous verification, nor defend against AI-driven impersonation and deepfake risks targeting financial APIs.

The Identity Fabric: A New Model for Third-Party Trust

The future of third-party identity management lies in identity fabrics — unified, adaptive, and intelligence-driven IAM platforms that merge workforce, customer, and partner identity into a single governance layer.

An identity fabric provides:

• Federated trust across external organizations via SAML, OAuth 2.0, or OIDC.
• Bring-your-own-identity (BYOI) and biometric authentication support for frictionless access.
• Policy-Based Access Control (PBAC) — fine-grained, contextual authorization.
• Delegated administration — letting partners manage their own users securely.
• Automated lifecycle management — deactivating access the moment contracts end.
• Comprehensive audit trails — aligned with DORA, FIDA, GDPR, ISO 27001, and FCA/PRA standards.

This architecture ensures continuous verification, enabling institutions to balance usability with regulatory assurance.

Identity as the New Competitive Advantage

In the embedded finance ecosystem, your partners are your front-end and your APIs are your storefront.
That means identity is your control plane — and your differentiator.

Financial institutions adopting identity fabrics are better positioned to:

• Reduce time-to-onboard from months to days
• Achieve measurable compliance across jurisdictions
• Prevent unauthorized access and orphaned accounts
• Enable secure innovation through trusted partnerships

As embedded finance matures, those who invest in modern third-party access controls today will define the trust fabric of tomorrow’s financial ecosystem.