Embedded finance started on the transactional side – integrated payments or buy- now-pay-later at the point of sale, for example, have become standard.
Now we are starting to see more relational embedded finance – for financial services that are not just for one point in time, but cover an ongoing relationship. So, when someone has seen a property they want to buy, embedded relational finance can be available for the mortgage and all the insurance products they need going forward. This evolution of the embedded ecosystem is going to gather speed in 2023 and move into other areas such as wealth.
One big driver is the pensions gap – or the savings gap – the difference between what people are saving into pensions and what they will need to maintain their lifestyles. Saving can be hard. But by embedding the incentivization to save, you can achieve bigger savings pots faster.
It is about sneaking a smart way to save into a transaction. An example is belonging to a loyalty scheme that gives you a US$10 cashback on a US$100 purchase and offers you the option of putting the US$10 into a pot to save or invest. This is embedded investing or, in finance terms, Wealth-as-a-Service.
The other big driver is the use of client data intelligence, combined with investment know-how and market view, to produce the right personalised recommendations – by knowing the customer, what they want, and what they need.
This means being able to use a customer’s profile to provide them with ideas that are close to their heart and it’s going to shape impact and sustainable investing. The push for this will not just come from the consumer but from the regulatory and governance side. We will get it offered as ‘the right thing to do’ and it will be communicated as such, encouraging us to invest hopefully with impact.
Finally, I think 2023 will see blockchain decoupled from the crypto hype, thanks to the market correction we are seeing now. This is about using blockchain to store proof of ownership of assets and values – it can be real estate (physical or digital), intellectual property, art, or any luxury good.
Essentially, this all comes down to orchestrating people’s wealth – bringing multiple underlying services into a single view and contextualising them at the point of need. At the moment wealth is siloed. That is changing and the winners will be those that can offer this with relevance to the consumer.
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