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apidays LIVE LONDON - The Embedded Finance by Simon Torrance

The document discusses the emergence of embedded finance, highlighting a significant market opportunity valued at $7.3 trillion by 2030 across embedded payments, lending, and insurance. It describes how technological innovations allow seamless integration of financial services into various platforms, enhancing customer experiences and creating new revenue streams. Additionally, it emphasizes the shifting landscape of banking and insurance due to digitization and the rise of platform business models.

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Embedded Finance: Welcome to next wave of innovation and value Simon Torrance, Rainmaking.io API Days Live, 27 October 2020
2 Market Opportunity *Market value Embedded Payments Embedded Lending Embedded Insurance $7.3 Trillion* Global 2030 Other Sources: Simon Torrance analysis; sector interviews; Bain Capital Ventures; Morningstar data
3 Market Opportunity *Market value Embedded Payments Embedded Lending Embedded Insurance Top 30 Global Software Companies Top 30 Global Financial Institutions $3.6 Trillion* $5.1 Trillion* $7.3 Trillion* Today Today 2030 Licenses & Deposits Internet, Cloud & Mobile Tech Financial Technology Other Source: Simon Torrance analysis; Bain Capital Ventures; Morningstar data Where to Play? How to Win?
4 Introduction www.Simon-Torrance.com • Breakthrough Innovation • Platform & Ecosystem Strategy • Venture Building
5 What is Embedded Finance? Abstracting financial services functionality into technology to enable any product or service provider or developer to seamlessly integrate innovative financial services into their customer propositions and experiences. • Visible complementary add-on, or • Invisible native component Better customer experiences, easy integration, real-time data, new revenue streams. Cash Accounts Payments & Accounts Investments Payments & Lending Insurance Examples Multiple Source: Simon Torrance
6 Many applications, just scratched the surface…
7 Very tangible commercial benefits for merchants + Insurance +50% Net Profits + Payments 3.5x SaaS TAM/ARPU + Loans + Insurance +20% to order value +50% conversion Source: Simon Torrance analysis
8 Strong tailwinds Covid + Tech + Capital: • Poorly served, unmet needs • Abundant ‘dry powder’ • Accelerating digitisation Blurring boundaries, new digital ecosystems Platform business models dominating Sources: McKinsey Global Institute; Plattform-Index
9 Digitisation shakes things up Banking Insurance Banks Branches & Channels Customers Reinsurers Primary Insurers Brokers & Channels Customers Regulators Regulators Sources: Simon Torrance
10 Fragmentation of ‘Industry Stacks’ Banking Insurance Bank Branches & Channels Customers Reinsurers Primary Insurers Brokers & Channels Customers Regulation Regulation Sources: Simon Torrance; 11:FS Banking as a Service report 2020
11 New solutions, new players, new infrastructure X-as-a- Service InsurersBanks X-as-a- Service Sources: Simon Torrance; 11:FS Apps Bank Insurer Apps
12 New ecosystems, new contexts X-as-a- Service InsurersBanks X-as-a- Service Non-FS: Platforms & Apps Smart Products Digital Wallets Data Developers Sources: Simon Torrance; 11:FS Apps Bank Insurer Apps
13 New assets and new platforms X-as-a- Service InsurersBanks X-as-a- Service Non-FS: Platforms & Apps Smart Products Digital Wallets Data Developers Sources: Simon Torrance; 11:FS Apps Bank Insurer Apps FS Developer Platforms Digital Assets (Blockchain)
14 New battlegrounds X-as-a- Service InsurersBanks X-as-a- Service Non-FS: Platforms & Apps Smart Products Digital Wallets Data Developers Sources: Simon Torrance, 11:FS Apps Bank Insurer Apps FS Developer Platforms Digital Assets (Blockchain)
15 Decline of old business models Source: McKinsey Global Institute, July 2020 • Low interest rates • Increased competition • High costs • Obsolete infrastructure • Non-digital leadership
Rise of platform business models, now taking over FS $421 $330 $316 $238 $218 $215 $205 $188 $96 $91 $250? $87 $78 $233 $222 $180 $165 $162 $139 $137 $135 $134 $97 $200? Top 10 2010 ($bn) Top 10 2020 ($bn) Source: Simon Torrance analysis; Morningstar data Waiting in the wings
17 What is a ‘Platform Business Model’? Source: Simon Torrance, New Growth Playbook Platform Business PRODUCERS Products Services Content Software Data Apps Knowledge Ideas Money CONSUMERS Individuals Big Orgs Small Orgs Machines Facilitate interactions ✓ Network Effects ✓ Control points ✓ Plug & play infrastructure ✓ Workflow tools ✓ Data intelligence ✓ Governance ✓ Aims Requirements
Digitise existing business New digital solutions Developer Platforms Online Marketplaces Ecosystem Orchestration Impact potential Complexity/Time to value 1 2 3 4 5 Build muscle here…fast Five main platform business model archetypes Source: Simon Torrance
19 Key Requirement: Dual Innovation New ScaleUp 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? Solve problems for customers Source: Simon Torrance
Thank you Simon Torrance, Rainmaking.io www.Simon-Torrance.com/blog