Embedded Finance
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Rise FinTech Insights Embedded Finance #HomeofFinTech hello Contents 03 25 Embedded Finance: Monetising the creative economy Creating a seamless future for financial services 29 Machine learning in healthcare 05 The next wave of FinTech 31 infrastructure Using alternative data to rethink financial services for Indian farmers 09 FinTech’s role in Banking 33 as a Service Rise ecosystem insights 11 35 Cloud and APIs enable new From our Rise sites banking digital journeys 39 15 Rise FinTech Company of the Year Point of Sale financing is 41 driving ecommerce Rise global ecosystem 17 43 Point of sale financing Notes 19 Enabling sustainability through embedded investments 23 Carbon investments 01 / Rise FinTech Insights 02 / rise.barclays Embedded Finance: Creating a seamless future for financial services By embedding financial services into their Technology is key – APIs and the cloud offerings, fields such as healthcare and allow core financial services to be re-formed, In simple terms, Embedded Finance allows companies to create agriculture, and even the music industry, offered and co-developed with third-party stand to benefit. companies, bringing to life the predicted innovative financial offerings that are integrated into the act of B2C-to-B2B shift for FinTechs. As change in purchasing a non-financial product or service. You might ask what's new and whether these technology domains takes place, a this has been done before. It has, but in new era of rapid evolution may present itself a relatively small way. In payments alone, to the industry. Being prepared for that and By embedding financial services (from The growth of Embedded Finance is a Embedded Finance 2020 revenues were being open to the opportunities and payments and lending to savings and reliable indicator that those predictions are $16.1 billion, but by 2025 they’re forecast partnerships it presents will be vital because insurance), new customer journeys that playing out. It’s a trend that everyone in to reach $140.8 billion2. Embedded Finance, of the opportunities for the FinTech solve real-world problems for consumers are financial services should be familiar with, on a deeper and bigger scale, really opens ecosystem, the financial services industry possible in many sectors, including retail, because of its transformative vision of the the door to major innovation. That is, as long and its global clients. health, education, transportation industry, shaped by the combined forces of as three things happen: and agriculture. disruptive technology, new customer If the big incumbents are brave enough, and journeys and banks’ abilities to add value. the FinTech community can continue to be What makes Embedded Finance exciting Together, these factors will shape how nimble in innovating, then new value from a FinTech perspective is not only the brands are experienced by customers and 1. Financial institutions will need propositions and customer experiences possibility of developing creative solutions to clients in many sectors, at an estimated value to discover possibilities by should emerge that truly solve for customer these problems but also the availability of in the US alone of $3.6 trillion in ten years’ redesigning and opening up their convenience. In this way, Embedded Finance new, modular technology, in the form of time1. core technology stack (for banks, would enable a ‘win-win-win’ for Banking as a Service, that underlies and this means Banking as a Service) incumbents, startups and consumers alike. supports those solutions. For example, in lending, retailers are embedding loan options when customers 2. FinTechs will need to continue their Read on to learn how market sectors, The importance of new technology reminds purchase big items like large electrical innovative drive and partner with FinTechs and the banking industry are me of the closing keynote, given by FinTech goods at the checkout. In transportation, the financial services sector to fuse responding to Embedded Finance and investor Eileen Burbidge of Passion Capital, ridesharing companies Uber and Lyft have their offerings into that core stack developing new opportunities. to a recent New Frontiers conference, already created seamless payments for Barclays’ annual technology event, which customers, and are now extending this to the 3. Both financial institutions and included a number of predictions about what insurance market by providing cover for their FinTechs will need to explore Paul Compton businesses would be focused on in 2025. One drivers – cover that’s active only when they're partnerships across other sectors Global Head of Banking was that innovation and digital strategy carrying passengers. That’s quite different to where the magic of ‘embedding’ and Co-President, would no longer be separated from an traditional car insurance models. really takes place Barclays Bank PLC organisation’s core business strategy. The merging of these formerly distinct elements Neat, innovative ideas like these are a very reflects the growing importance of different way to reimagine the core payment, innovation in our evolving digital world. The insurance and lending operations of a keynote also anticipated that FinTechs would traditional bank or insurance company. If you’re in FinTech and are as excited as we are by these developments, we’d increasingly shift from B2C to B2B models, as New value propositions extend beyond love to hear your ideas and thoughts. Contact your closest Rise team in smaller financial services companies emerge those use cases. London, New York or Mumbai to discuss how we can collaborate. as agents of change, injecting innovation into traditional banking technology. 1. Forbes 03 / Rise FinTech Insights 2. Forbes 04 / rise.barclays The next wave of FinTech infrastructure In this article, Michael Gilroy, General Partner at Coatue Management, considers Banking as a Service (BaaS) infrastructure, which is providing opportunities for forward-looking technology companies. It's expected that greater disruption in the Today, all that’s changed. The current Embedded Finance space will result from scale at which FinTechs’ P&Ls are growing BaaS, along with more innovation by banks is unprecedented and, judging by the total and newer, better ways to meet customers’ market capitalisation across financial financial needs. services globally (which is growing at a rate of 6%), there's still a lot of legacy infra BaaS companies are attacking one of financial services out there ripe for the largest total addressable market FinTech disruption. opportunities on the planet, but BaaS is a term that’s much overused and, in some Payments cases, misused. For example, people use it when they’re simply providing a basic One area – the biggest financial service card-issuing capability, purely by connecting to become embedded – is B2B payments. consumers to banks. That may be a growth Historically, payments live at the edges of an model for many in the industry, but it experience for businesses. A majority were doesn’t capture BaaS to the fullest. BaaS either offline, or buried in PDF invoices being encapsulates not only the offering of a scraped by ‘version 1’ bill pay solutions. For struct financial product, but also provides the forward-looking technology businesses infrastructure to manage the product from today, payments are fully embedded into a compliance through marketing and servicing. software suite that provides not only a better customer experience, but also a nice gross Additionally, the best-in-class BaaS platforms margin lift. will allow brands to become ‘programme managers’, companies that banks underwrite BaaS providers today are not only enabling and authorise to distribute their products brands to decide which financial institution and that take on the additional compliance to partner with on processing payments. ure burden in exchange for economics. They’re also helping them to offer additional financial products via simple APIs. For a I’ve been investing in FinTech since 2014 SaaS business that has historically only and in many ways it felt too early – adequate processed payments, they can now infrastructure did not exist. Millions of very easily complement that experience venture dollars went into working with with a business bank account or regional banks to stand up even the most merchant cash advance. basic of programmes, which instead should have been spent on new and innovative financial products. 05 / Rise FinTech Insights 06 / rise.barclays Merchant benefits BaaS platforms are the final piece of the Get BaaS, get creative " The best BaaS platform will puzzle and allow brands to dynamically Remember, at its core BaaS eliminates As these merchants move beyond simple adopt the latest infrastructure pre-approved offer brands the greatest choice time and money to market. So, whereas in payment processing, the next logical step by their partner bank. For the last five years, the past companies would spend millions every step of the way." becomes proprietary credit opportunities startups have been steadily building the API of dollars and months on end getting a enabled by an eager audience, proprietary stack for financial services. During that time, Bank Identification Number (BIN) to launch Michael Gilroy data and direct access to payment flows. As all of those services have been integrated a basic card, with BaaS you can now software platforms have evolved, they’ve into one brand or another, after having been General Partner, Coatue Management drastically reduce that outlay, allowing opened their APIs, and created a treasure approved by the appropriate regional bank. you to reallocate the effort on creating trove of underwriting data that merchant FinTech infrastructure has matured new financial products and features. lenders previously never had. Once the significantly during this last cycle, but there underwriting problem is solved, the next are certainly new and interesting pieces on Share this… thing is to have a fail-proof way to get paid. In this respect, perhaps the most compelling the horizon that are being demanded by The ability to immediately credit and debit application of BaaS, one supporting societal brands.