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Embedded fintech: the need to solve customers’ real problems

By Jay Wilson, Investment Director, Albion Capital  



Fintech is a flourishing industry but one that still remains a mystery to many. With businesses aiming to enhance or automate financial services and processes through technology, it covers anything from mobile banking and insurance to investment apps. A subset of this is a growing area called embedded fintech, which involves integrating financial products (e.g. payment processing or insurance) into the offering of a non-financial business (e.g. a retailer or food delivery company).


As a longstanding investor in the fintech space with around 20% held across our portfolios, we have witnessed London become the acknowledged capital of embedded fintech in Europe but feel that the industry still has some way to go in order to reach its full potential. To maximise this huge opportunity, start-up companies, and investors in them, need to focus firmly on creating lasting customer relationships, rather than enabling transactions. 


Ask the everyday consumer or business customer what they want from embedded fintech and you’ll probably be met with blank faces. Most people will care less about the product but more about how these services can solve their problems, improve their lives or make their business more efficient. What is important is accessibility, be it on mobile, online or in-person, and how it compares to their expectations from other user journeys. Ultimately, they care about financial outcomes rather than financial products. 


Enabling outcomes for the benefit of everyone 

The real value of embedded fintech will be achieved when software start-up companies focus on solving customers’ real problems, rather than the products themselves. Take buying a car, for instance. Today this still requires multiple calls to finance providers, insurance companies, admin fees and emailing or even posting documents  – and that’s if the process works effectively.


To solve this, embedded fintech needs to deliver interoperability and collaboration. You should be able to agree, finance, insure, and transact from anywhere. Legal documents, identity verification and payments should all be made seamlessly behind the scenes. Each step in the transaction focuses on the outcome rather than the product. 

Companies who build, and vendors that adopt, embedded fintech need to constantly question how they can delight, retain and grow customers. These deeper customer engagements provide a better assessment of risk and product suitability and can fundamentally result in lower risk, lower loss and higher utility experience. It’s a win-win for all.


Changing the embedded fintech narrative 

The shift to cloud-based mobile fintech is underway but we need to understand embedded fintech as more than just another layer of technology. It’s about embedding finance to cement lasting customer relationships, rather than simply enabling transactions. To get to the real point of the sector, it’s time to replace the buzzwords of BaaS (banking as a service) and BNPL (Buy Now Pay Later). What we are really talking about is financial orchestration but even this obscures the whole point. 


The most exciting investments in embedded fintech are with the company founders who understand why simply providing better products is not enough.  


Those who understand how fintech can create long-term relationships with financial services providers are the ones who will create the lion’s share of the opportunity that is anticipated.