Embedded Finance intro presentation - Simon Torrance August 2021
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The document discusses the $7.2 trillion market opportunity in embedded finance, highlighting the need for modernization in financial systems and business models to adapt to new consumer behaviors. It emphasizes the benefits of integrating financial services into various products and services, enhancing customer experiences through innovation. Additionally, it outlines the evolving distribution landscape and key strategies for organizations to optimize core functions while pursuing new growth opportunities.
Embedded Finance intro presentation - Simon Torrance August 2021
- 1. Embedded Finance The $7.2 Trillion market opportunity (and how to realise it) Simon Torrance FTT Embedded Finance, August 2021 Simon@Simon-Torrance.com www.linkedin/in/simontorrance www.embedded-finance.io
- 2. Introduction Board and Leadership Advisor • New Growth Strategy • Platform & Ecosystem Strategy • Venture Building www.embedded-finance.io
- 3. 3 Problem #1 – our financial system is not fit for purpose Source: Mercer for World Economic Forum 2018 Source: Simon Torrance, based on FICO Bank Study 2020 E.g. Retirement savings gap ($ Trillions) E.g. Banks don’t address full needs
- 4. 4 Problem #2 – our business models are out of date Source: McKinsey Global Institute, July 2020; Simon Torrance analysis • Low interest rates • Increased competition • High costs • Obsolete infrastructure • Non-digital leadership “Scared sh**less”
- 5. 5 Problem #3 – New Consumers, new Behaviours Sources: AppAnnie; FT; NGA
- 6. 6 Digitising existing business (most focus today) Intelligent digital solutions Developer Platforms Online Marketplaces Ecosystem Orchestration (inc. ‘Super Apps’) Impact potential Complexity 1 2 3 4 5 Digital Business Model Archetypes – which win? Source: Simon Torrance for the World Economic Forum 2020
- 7. What is Embedded Finance? Where does it fit in? Abstracting financial services functionality into technology to enable any product or service provider, retailer or developer to seamlessly integrate innovative financial services into their customer propositions and experiences: • Visible complementary add-ons, or • Invisible native components Personalised and relevant to context Payments & Lending Payments, Banking, Insurance Payments, Lending & Insurance Lending & Insurance Lending & Insurance Examples Payments, Lending & Insurance Source: Simon Torrance 10x better customer experiences, faster/cheaper/simpler/fairer, leveraging new data sources (Open Banking/Open Data), financial inclusion
- 8. Very tangible commercial benefits… + Payments + Loans + Insurance 5x SaaS TAM/ARPU + Insurance 100m new customers Source: Simon Torrance analysis, industry interviews B2B Software Businesses Digital Service Providers & Platforms + Credit + Insurance +20% to order value +50% conversion Retailers & Manufacturers
- 9. Started with payments… *Market value Embedded Payments Embedded Lending Embedded Insurance $7.2 Trillion* Global 2030 Other Source: Simon Torrance analysis
- 10. FinTech: becoming the world’s new innovation platform *Market value Embedded Payments Embedded Lending Embedded Insurance Top 30 Global Software Companies Top 30 Global Financial Institutions $3.6 Trillion* $5.1 Trillion* $7.2 Trillion* Today Today 2030 Licenses & Deposits Internet + Cloud + Mobile Tech + Financial Technology Other Source: Simon Torrance analysis; Bain Capital Ventures; Morningstar data
- 11. Existing Customer base (Products) Agents, Brokers Fintechs/BigTechs Developer Platforms & Neo Aggregators Direct Partners New Customers (More personalised, affordable and compelling solutions integrated into daily life) Your FS Products Your Underwriting APIs New FS distribution Traditional FS distribution Your Capabilities APIs Compliance & Capital Compliance & Capital Today Tomorrow Any Products Any Underwriters Any Capabilities Digital Wallets Any Company Copyright: Simon Torrance 2021 The evolution of FS distribution: new control points
- 12. Growth and market power concentrating at top of the stack. Control Points are key. General Brands Fintech brands Dev Platforms Sponsor FIs Increasing choice of suppliers Robust APIs not enough Commoditising Strong customer affinity Source: Simon Torrance analysis
- 13. Leading bank strategies (insurers starting to follow…) Full Service Retail Bank BaaS Platform New Customers Sell BaaS Sell FS New Accounts New Customers Attractive FS $$ Data & $ Embedders Capabilities Transaction Services Capabilities New Accounts New Customers $$ $$ Sell FS Source: Simon Torrance analysis
- 14. 9. Make it tangible (Optimise Core + Create Future) BOLD AMBITION 1. Clear, shared vision and strategy 2. Rich Portfolio COMPELLING VALUE PROPS 3. Based on new insights 4. New commercial models ENERGISED ORGANISATION 5. Dual innovation for execution speed 6. Ring fenced investment EFFECTIVE SCALE-UP 7. New methods and tools 8. Core enablers 9 Success Factors (brands, retailers, FIs, techcos, et al) Source: Simon Torrance analysis
- 15. #1 Foundational Requirement: Ambidextrous Org New Innovation Governance Optimise the Core Fast track the Future • Internal Ventures • Fintech Collaboration • External Ventures • M&A • API-ise • Data-fy • Automate Where to play/ How to win? Source: Simon Torrance analysis