The Great Unbanking: Digital Identity 3.0, Embedded Finance Rewrite Money Rules

Fintechs, tech companies and established financial services institutions have always been an awkward tango.

A focused tech upstart looking to disrupt and reinvent a specific function of the bank and insurer is always seen as a threat. And until regulators say otherwise, banks and insurers have always kept them at arm’s length, flirting with their value propositions, adopting technology for customer experience but never truly adopting them for their core banking services. 

Money 20/20 in Thailand showed that things are changing. And there are two key reasons: the reimagining of identity and embedding finance to make it seamless and part of people’s lives. Both transformative forces are also quietly redrawing the banking landscape as we know it.

So while the traditional banking and insurance industries continue their century-old dance of mergers and acquisitions, these twin revolutions are fundamentally rewiring the DNA of financial services — and preparing the ground for an Agentic AI future that few institutions are ready to face.

The authentication arms race

“Fraud isn’t new,” said Penny Chai, vice president for APAC at Sumsub, with the calm demeanor of someone who’s spent years in the digital identity trenches. “But we are always behind [the fraudsters].” It’s only getting worse: now armed with unprecedented AI capabilities to create synthetic identities so convincing they sail past conventional verification systems.

The numbers show a sobering reality. Moody’s estimates synthetic identity fraud at USD40 billion annually — a figure that should terrify any financial institution. Yet Chai, speaking at the sidelines of Money 20/20, remained coolly optimistic, describing an authentication ecosystem that uses “AI to fight AI.”

This is where banks are warming up to Digital Identity 3.0. What makes it more than just another identity play with better biometrics or faster checks is that it requires a fundamental rethinking of who controls identity.

“We give the permission and the control back to you, me, and the people in the masses,” Chai explained,  describing Sumsub ID, a portable self-sovereign identity system that allows customers to verify once and use that verified identity across multiple services.

“You can use a secure ID that you have already passed [with banks or regulators], and you get onboarded faster. You can use [banking] services faster, and it’ll be compliant with the regulator,” said Chai. This approach upends traditional banking identity models, where each institution maintains its silo of KYC information, forcing customers through redundant verification processes.

The result is more than just convenience — it’s a new form of power distribution in the financial world. “The controller is me, you, and everyone else,” Chai emphasized.

This democratization of identity verification represents a significant shift from the bank-controlled models of the past. And as such efforts get managed across banking networks and approved by regulators, identity management becomes more seamless.

Embedded finance: When banks become invisible

Meanwhile, across the conference floor, Samarth Bansal, general manager for APAC at remittance giant Wise, explained how traditional banks are trying hard to recapture customers fleeing their ecosystems.

“Remittance is almost like the first product that starts moving away, and then the customer lifetime value starts moving away,” Bansal warned.

This exodus of customers has accelerated embedded finance — the integration of financial services into non-financial platforms and experiences. But unlike previous fintech revolutions that tried to replace banks or compete with specific bank functions, the current embedded finance model looks to create more symbiotic relationships between institutions and technology providers.

“We don’t think of [banks] as clients anymore; we think of them as partners,” Bansal said of the banks Wise works with. This partnership model, created out of a realization that fintechs and banks need each other, also solves fundamental pain points for traditional banks: customer experience and operational efficiency.

The pain is real: banks reportedly spend “billion in costs to solve for just manual repairs of transactions that are going through SWIFT,” according to Bansal. By integrating Wise’s directly into bank interfaces, these costs can be dramatically reduced while improving customer experience.

The unseen transparency revolution

Both trends converge around a surprising common denominator: radical transparency. For years, banks have obscured fees, exchange rates, and transaction status, only revealing these amounts for regulatory purposes. Now, both Sumsub and Wise are building new models based on showing customers everything.

“You cannot hide charges,” Bansal stated. “The moment someone figures out that you are marketing as zero remittance fee, and then you’re charging 3% in the FX — we’re all smart and educated enough now to make that comparison, and trust erodes very quickly.”

This shift toward transparency isn’t merely ethical — it’s strategic. As Chai explained, “[We are] basically going to ensure that we have a trusted ecosystem.”

That trusted ecosystem drives both Digital Identity 3.0 and embedded finance. When Chai described the multilayered security approach Sumsub takes, she emphasized building a “trusted” ecosystem.

But building a trusted relationship on transparency is not always smooth, especially when banks are used to operating opaquely. When asked if Wise has walked away from potential partnerships with banks that resist transparency, Bansal is diplomatic but firm: “Every bank that has gone live with us is transparent… there has got to be an alignment where we think we’re adding value together.”

None of these transformations would be possible without sophisticated AI systems running in the background. Sumsub and Wise describe using AI for fraud detection, operational efficiency, and customer experience improvements.

“We have an internal mechanism through which CS agents can train themselves, ask questions that customers are asking, get a very good answer that’s generated through LLM, and leverage a lot of the knowledge that we have internally,” Bansal explained.

Sumsub similarly uses AI to detect the sophisticated synthetic identities now flooding financial systems. Chai explained that they use multilayered security approaches, including device fingerprinting and behavioral analysis, to detect sophisticated fraud networks.

The coming agentic finance future

When asked about the future of agentic AI — autonomous AI agents that make financial decisions — both executives expressed caution tinged with inevitability.

“I think agents will always be acting on behalf of someone,” Bansal said, when asked whether rogue agents will create trouble setting up accounts and requesting transactions without their users’ knowledge. “I can’t perceive a world where this is just left to [AI agents] — at least for now.”

Nevertheless, Chai sees identity verification as becoming “a fast-moving concept” that’s “changing even every minute because of the technology that we are exposed to today.” The convergence of “generative AI, machine, blockchain” — all these elements are transforming what identity means. It also points to a future where agentic AI may require its own form of digital identity.

Throughout the conference, banks, regulators and fintechs pondered on stage the impact of agentic AI in banking, or what they called as agentic banking. As machines increasingly make autonomous financial decisions, the question of how to verify and authenticate an AI agent becomes paramount. Here, Digital Identity 3.0, together with embedded finance, may provide the architecture for secure machine-to-machine transactions at unprecedented speed and scale.

The “blurring” lines

Perhaps the most profound insight from both interviews is how the distinction between banks and fintechs are no longer obvious. As Bansal puts it, “[The line] is already blurring.”

The true revolution may not be banks versus fintechs, but a fundamental reimagining of what financial services are and how they’re delivered. “We will get to a world where it is [about] capabilities,” Bansal predicted.

In this new ecosystem, trust flows not from centuries-old institutions but from demonstrated value. “My perception is that this has a lot to do with ensuring that you’re delivering on the customer expectations,” Bansal noted.

As AI agents begin making financial decisions, managing digital identities, and conducting transactions at machine speed, the financial institutions that survive won’t be those with the longest histories — they’ll be those that can adapt to this new paradigm of transparency, embedded services, and dynamic identity verification and build the right fintech ecosystems.

The only question is which institutions are paying attention.

Image credit: iStockphoto/NatalyaBurova