Institutional capital is no longer confined to the traditional corridors of banks and investment houses. It is increasingly flowing through fintech infrastructure and into the digital platforms businesses use every day. Recent large‑scale private securitisations, such as Capital on Tap’s £500 million deal, show that capital markets are being rewired through fintech partnerships.
This shift means institutional funding can now reach SMEs through embedded channels within non‑financial platforms. And fintechs are emerging as the critical enablers of this capital distribution, bridging the gap between investors and the businesses that need funding most.
Funding flows through everyday platforms
Digital platforms like marketplaces, payment providers, and even accounting software are where distribution happens now. For SMEs, this means access to capital is increasingly embedded directly into the ecosystems they already use to sell products, manage cash flow or reconcile accounts. This innovation is supercharging the category, with embedded finance projected to reach $251.5 billion by 2029. The scale of this growth is precisely because fintech players have transformed the way businesses access capital, making financing faster, more seamless, and closely aligned with everyday workflows.
Behind the scenes, alternative lenders and embedded‑finance providers are doing the heavy lifting by providing the underwriting, compliance, and data capabilities that allow capital to move safely and efficiently at scale. These players work through partners like payment providers, marketplaces and SaaS platforms, enabling funding to be delivered directly within the digital environments SMEs already rely on. Traditional lenders have long struggled to serve these businesses due to limited data, resources and concerns about risk. Embedded capital firms close that gap by delivering funds seamlessly within the digital environments where SMEs operate every day.
Capital markets meet the real economy
The key to this success is the ability to collapse the decision-making time needed for an application to be approved by automating underwriting, and pre-approving finance offers.
AI is accelerating this transformation. With access to rich platform data and advanced underwriting models, fintechs now dynamically assess risk and tailor financing to the specific circumstances of each business. This level of precision makes capital flows faster, more adaptable and more resilient. This approach also reduces default risk while opening the door to SMEs that traditional lenders have historically overlooked.
Embedded models also make capital allocation more efficient. By using platform data and automation, institutional investors can reach segments that were previously uneconomical to serve. In fact, embedded‑finance channels could account for around 25 % of retail and SME lending in the years ahead. Distribution costs fall, automated underwriting becomes more trusted, and soon capital can be deployed across a broader and more diverse set of businesses. As repayments can be flexible and in line with real trading activity, these models support sustainable and socially responsible lending.
How partnerships accelerate capital penetration
As embedded finance becomes a key route for institutional capital to reach SMEs, partnerships are emerging as one of the strongest levers for scale. When financial services providers enter new markets, early capital‑programme penetration often stalls, typically due to narrow eligibility criteria, unfamiliar data environments and drop‑off between approved offers and funded businesses. Even with strong demand, large segments of the merchant base can remain out of reach.
To address this, providers are partnering with a specialist infrastructure platform to broaden eligibility, strengthen execution and reduce operational friction, all while keeping its existing distribution model in place.
Within five months, penetration can reach ~8.5%, driven by expanded eligibility and more efficient execution. By combining established distribution with specialist underwriting and operational infrastructure, the provider can turn capital from a limited feature into a scalable growth lever for new‑market expansion.
This reflects a broader industry shift, which is when digital platforms and specialist infrastructure work in tandem, institutional capital can reach SMEs more efficiently, more responsibly and at a far greater scale.
