Embedded finance means customers are able to pay for goods while they are on a retailer’s site, right? .
“Payments are just table stakes,” said Ben Robinson, co-CEO of Aperture, a consultancy based in Switzerland. “If you are just doing payments you aren’t differentiated.”
Embedded finance now can include lending, insurance, factoring and wealth management, he said.
Michael Stemmle, CEO at Zurich-based additiv, said the company creates value for financial firms by bringing them new customers at minimal acquisition cost. The company describes itself as an international digital investment and financial solutions company. He also describes the company as a connections platform with 1,400 APIs that can readily link with a significant range of both financial product manufacturers and non-bank corporations looking to add some financial products.
An existing financial services firm might use additiv internally because its old siloed technology doesn’t meet today’s business demands for flexibility. It could use additiv and its huge number of APIs to embed third party solutions and deliver them through the additiv platform, or build its own solutions on the platform. A non-financial firm like a retailer or an auto dealer could use the platform to offer financing, factoring or insurance solutions that are compliant for most jurisdictions.
One of Switzerland’s largest retailers, Coop, announced 24 October that it will use additiv to launch an integrated financial services app, cleverly named Coop Finance+. Its initial catalog shows what additiv can do with those 1,400 APIs.
To start, Coop Finance+ will offer banking from Hypothekarbank Lenzburg and pensions through Vanguard, OLZ, Liberty Vorsorge and Glarner Kantonalbank. With additiv Coop will immediately become Switzerland’s largest provider of free cash withdrawals. Its banking services will include debit cards, competitive terms on savings, above average retirement account rates, and exclusive loyalty benefits.
“The API-first cloud platform integrates and orchestrates Coop’s various financial services partners into a seamless end-to-end customer experience,” the companies said in their announcement.
“With open architecture, they can choose whom they want to collaborate with and can create different regulated verticals — one bank for investment, another bank for payments, all on one platform and everything is delivered as a service. We provide access to marketplaces and clients with linked demand and supply.”
The platform includes KYC and offers a choice of CRM systems, or customers can use their own.
“Everything is there for end-to-end portfolio management — underwriting for insurance, pricing engines for insurance, and origination pricing for mortgages and servicing, it is all there. You can source along the value chain with one or many suppliers per product and because it is open architecture you avoid lock-in.”
The biggest problems in financial services, Stemmle ventured, it’s a very captive model.
The financial services industry is not there yet, he added.
“We are making it more flexible and allowing along the value chain each component that is suited from a third party. You can be in insurance and use the platform to source investment business or pension business. It’s also an ecosystem where you can generate collaboration. We bring together different players that want to collaborate with each other.”
The latest phase takes things even further. It’s about unbundling distribution and manufacturing so that financial services can be embedded into third-party channels and into existing user journeys, Stemmle said. Retailers, whose data already provides some startling levels of insight into their customers [see the NY Times article on how Target selected women who were pregnant, or planning to be, and marketed to them https://www.nytimes.com/2012/02/19/magazine/shopping-habits.html].
Companies can use their customer information to put relevant services in front of customers when and where they need them as they lead their digital lives. If a retailer could identify the coming of a newborn, or a woman planning a wedding, or a 50-year old exhibiting signs of mid-life crisis by shopping for a fast sports car, the potential for financial pitches can be imagined.
The biggest problems in financial services, Stammel ventured, is that it is a very captive model and very expensive in its production.
“Financial services is like the auto industry when it was was making their own steel and brakes. Then they started to go to a platform approach” and buy components like brakes, seats and shock absorbers. “The financial services industry is not there yet, which makes its products inefficient and expensive.” Not to mention rigid.
“We are making it more flexible and allowing along the value chain each component that is suited from a third party. You can be in insurance .and use the platform to source investment business or pension business. It’s also an ecosystem where you can generate collaboration. We bring together different players that want to collaborate with each other.
“The latest phase takes things even further. It’s about unbundling distribution and manufacturing so that financial services can be embedded into third-party channels and into existing user journeys. Embedded finance has several benefits – it reduces friction by putting relevant services in front of customers when and where they need them, on the platforms where they live their digital lives, instead of forcing customers to look for an offering.