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Embedded Finance - a new $7 trillion market opportunity

Embedded finance is a burgeoning $7 trillion market opportunity that integrates financial services into various products and services, enhancing customer experiences and providing commercial benefits for merchants. The document outlines the potential of embedded payments, lending, and insurance, highlighting its impact across sectors and the need for organizations to adapt to digital transformation. It emphasizes the importance of embracing new business models and technologies to thrive in this evolving landscape.

Business◦
Embedded Finance: a new $7 Trillion market opportunity Simon Torrance, Rainmaking.io November 2020
2 Introduction www.Simon-Torrance.com • Corporate Innovation • Platform & Ecosystem Strategy • Venture Building
3 What is Embedded Finance? 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 10x better customer experiences, faster/easier/cheaper integration, real- time data (Open Banking, sensors, etc) Cash Accounts Payments & Accounts Investments Payments & Lending Insurance Examples Multiple Source: Simon Torrance
4 Starting with payments… *Market value Embedded Payments Embedded Lending Embedded Insurance $7.3 Trillion* Global 2030 Other Sources: Simon Torrance analysis; Bain Capital Ventures; Morningstar data
5 Financial Technology enables a new wave of innovation *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 Potential market value of enabling ventures based on an extrapolation of current trends
6 Very tangible commercial benefits for merchants… + Loans + Insurance +50% Net Profits + Payments + Loans + Insurance 3-5x SaaS TAM/ARPU + Loans + Insurance +20% to order value +50% conversion Source: Simon Torrance analysis, industry interviews B2B Software Businesses Retailers Product Manufacturers
7 And big brands across all sector, for example… Source: Simon Torrance analysis New high margin revenues from: New distribution channels Insurance services Bundled propositions New high margin revenues from: Supply chain finance Consumer finance Richer loyalty/rewards schemes New Revenues from: Debit/credit services New distribution channels Lower costs New Revenues from: Supply chain finance Consumer finance Insurance New Revenues from: Producer/Consumer finance Insurance Banks Retailers Insurers Online Marketplaces Manufacturers Healthcare New Revenues from: Behaviour based insurance Supply chain finance
8 Many applications, just scratched the surface… E.g. Solar panels for 400m off-grid populations in Africa: Adoption driven by mobile credit and payments embedded in the product offer
9 Strong tailwinds Covid + Tech + Capital: • Poorly served, unmet customer needs • Accelerating digitisation • Abundant investment ‘dry powder’ Blurring boundaries, new digital ecosystems Platform business models dominating Sources: McKinsey Global Institute; Plattform-Index
10 Fragmentation of Financial Services ‘Industry Stacks’… Banking Insurance Bank Branches & Channels Customers Reinsurers Primary Insurers Brokers & Channels Customers Central Bank Regulation Sources: Simon Torrance; 11:FS Banking as a Service report 2020
11 …New solutions, players, infrastructure, battlegrounds X-as-a- Service InsurersBanks X-as-a- Service Sources: Simon Torrance; Inspired by 11:FS BaaS report Fintech Apps Core Bank Core Insurer Insurtech Apps Banking Insurance
12 …Financial Services and non-FS merge X-as-a- Service InsurersBanks X-as-a- Service Non-FS Platforms & Apps Sources: Simon Torrance; inspired by 11:FS Baas report Fintech Apps Core Bank Core Insurer Insurtech Apps New FS Developer Platforms & Marketplaces Digital Assets (Blockchain) New FS O/S Banking Insurance
13 Why act now? Digitisation impacts old business models Source: McKinsey Global Institute, July 2020; Simon Torrance analysis • Increased competition • New expectations • Obsolete infrastructure • Non-digital leadership
14 Digitising existing business Intelligent digital solutions Developer Platforms Online Marketplaces Ecosystem Orchestration Impact potential Complexity/Time to value 1 2 3 4 5 Platform business models Embedded Finance supports all digital business models Source: Simon Torrance 2020
And, ultimately, should support United Nations’ SDGs Financial Technology – the world’s new innovation platform Embedded Finance – the route to new value creation
16 Key Requirement: true ambidextrous organisations New Operating Model Optimise the Core Fast track the Future • Internal Ventures • ScaleUp Collaboration • External Ventures • M&A • APIs • Datafication • Automation Where to play/ How to win? Solve problems for customers 10x better Source: Simon Torrance
Thank you Simon Torrance Simon@Simon-Torrance.com LinkedIn: SimonTorrance