We’ve come a long way since Bill Gates highlighted: ‘Banking is necessary – banks are not’, back in 1994.  But only now are we seeing banking product dispersion being realised - through Embedded Finance.  However, to date this tends to relate predominantly to payments and loans. Wealth solutions have been largely ignored - until now.  A focus on Embedded Wealth is emerging – changing the dynamics of wealth management - with additiv at its core.

The Embedded Wealth opportunity and use cases
Spotting the opportunity to increase customer convenience, many successful consumer-driven platforms have embedded financial services into their offering, such as payments within Uber or point of sale lending at H&M.  They provide consumers with relevant financial services, at the time they need them, over the right channel, and tailored to their context.

Embedded finance allows firms to grow their addressable market. Last year Bain Capital Ventures highlighted that, in the US alone, Embedded Finance represents a USD 3.6trn[1] opportunity. 

At additiv, our market conversations indicate that the opportunity for embedding wealth services lies initially in six particular use cases:

• Retail and challenger banks: A proportion of existing customers have large cash balances but for various reasons do not diversify out of low or zero-yielding savings accounts. By embedding third-party investments, customers access these value-added services with minimal friction, improving banks’ income streams while lowering churn risk. Since retail bank PostFinance introduced own-labelled investment services to their retail customers last year, it has added about CHF30m a month in assets under management. And in the UK challenger Starling Bank, has already launched wealth services (via Wealthsimple).
• Financial health platforms: Most of these platforms, like Gusto (US) or Neyber (UK), initially help employees access their wages before payday. And almost all have, or plan, to add savings services, to help employee's financial health. Adding investment services is a natural step; Goldman Sachs and Apple recently collaborated to offer financial healthy choices.
• Asset managers: With asset managers focused on investment products and asset growth, embedding their capabilities into wealth services makes perfect sense.  This opportunity was recently recognized by Vanguard and Ant Financial Services Group in a joint venture. By accessing Vanguard’s automated service, individual Chinese investors, with at least CYN 800 (USD 113) to place in mutual funds, can now access Ant Financial’s wealth platform. 
• Health insurance providers: As a channel that almost all adults use frequently to upload medical bills, make and claim payments, there is already space to embed other services. In addition, most health insurance premium calculation data can be reused to help individuals make smarter decisions about their investments, removing friction from up-sales.
• Pension and life insurance providers: According to Citibank, the 20 largest OECD countries alone have a USD 78trn shortfall in funding pay-as-you-go and defined benefit public pensions. Retirement ages are set to increase, by offering wealth products through pension and life insurance providers, consumers can add contributions easily and gain oversight to make financial decisions. 
• Super apps and consumer platforms: These aim to be the single app helping people manage their digital lives. Apps, like WeChat in China and Tinkoff in Russia, amalgamate dozens of digital services from peer-to-peer payments through to ride-hailing, driving convenience and customer engagement. As a result, billions of users spend hours on these apps daily, leaving a trail of data improving these apps to better match the users to other useful services. And so, the apps footprint increases over time, including wealth services, which many have launched or embedded already.  

Ensuring Financial Institution’s don’t become a utility

Concerning the Google deal: “We’re very conscious around not being the dumb utility…not giving away the client-customer ownership that’s there” 

Michael Corbat, former CEO of Citigroup

If wealth providers do not expand their reach and value, they risk missing the consumer opportunity.  Embedding their services into third-party distribution channels allows them to grow or shift their customer base with lower acquisition costs, but also to capture network effects. It switches them from defensive to offensive mode. 

[1] The $3.6 Trillion Embedded Finance Opportunity - Rebank (bankingthefuture.com)

About additiv
additiv is a leading SaaS provider to the wealth management industry and partners with the world’s leading financial institutions to help them capitalize on digitization. Its market-leading DFS (Digital Finance Suite) is an orchestration engine that lets financial institutions quickly launch new propositions as well as giving them the intelligence to maximize customer engagement. Established in 1998 and headquartered in Zurich, Switzerland, with offices in Germany, Singapore, and Kenya and main development centers in Romania and Ukraine, additiv serves its customers around the globe. additiv is supported by a broad ecosystem of implementation and solution partners that enable it to deliver unparalleled customer success to wealth managers and credit providers globally.